30'^9      [Business 
B96        ^.pnir^^r^-^ 


Southern  Branch 
of  the 

University  of  California 

Los  Angeles 

Form  L-1 


This  book  is  DUE  on  the   last  date  stamped  below 


-  4  1924 
-3  3      1928 


-JUKI  4 1949 
JAN  1 3  195S 


Form  L-9-5)»-7,'22 


Hm: 


II 


EXPORT   HOUSES 


PARTI 


THE    EXPORT    MERCHANT 
By 

JOHN  F.  FOWLER 
Vice-President,  W .  R.  Grace  and  Company 


PART  n 


THE  EXPORT  COMMISSION  HOUSE 
By 

C.  A.  RICHARDS 
Manager,  Export  Department,  Bowring  and  Company 


PART  III     ••    . 

-  THE  EXPORT  FORWARDER 
By 

HENRY  A.  TALBOT 
Secretary,  R.  F.  Downing  and  Company,  Incorporated 


Being  the  Fourth 
Unit  of  a  Course 
in  Foreign  Trade 


BUSINESS  TRAINING  CORPORATION 
NEW  YORK  CITY 


^SSCbO 


Copyrijht,  1916,  by 

Business  Training  Corporation 

[iVintid  in  tht  United  Statts  of  jimtrica] 

jt!l  Riehti  JUitrutd 


Course  in  rorci^ii   i  f aue 


V\  r 

Edward  Ewing  Pratt Director        '  I  ^j  '\ 

Edward  Leonard  Bacher  -  Secretary        '.>   ^^ 


The  text  of  the  course  is  issued  in 

TITLE 

I.     Economics  of  World  Trade 
II.     The  World's  Markets 

III.  Export  Policies  .         . 

IV.  Export  Houses  . 

V.     Direct  Exporting 

VI.  The  Export  Salesman 

VII.  Shipping     .         .         . 

VIII.  Financing  .         .         . 

IX.  Export  Technique 

X.  Foreign  and  Home  Law 

XI.  Importing 

XII.  Factors  in  Trade-Building 


twelve  units  as  follows: 

AUTHOR 

O.  p.  Austin 

Edward  Neville  Vo«e 

(  P.  B.  Kennedy 
(  E.  C.  Porter 

ijohn  F.  Fowler 
C.  A.  Richards 
Henry  A.  Talbot 

Walter  F.  Wyman 

Paul  R.  Mahony 

j  Emory  R.  Johnson 
(  Grover  G.  Huebner 

(  E.  A.  de  Lima 
(  J.  Santilhano 

Edward  L.  Bacher 

PhanorJ.  Eder 

Carl  W.  Stem 

Chauncey  D.  Snow 


BUSINESS  TRAINING  CORPORATION 
NEW  YORK  CITY 


CONTENTS 

Part   I 
The   Export   Merchant 

I.  Operations  of  the  Export  Merchant.  ...  i 
The  Export  Merchant  Antedated  the  Ex- 
port Commission  Merchant — How  the 
Merchant's  Business  Is  Organized — ^The 
Theater  of  the  Merchant's  Operations — 
The  Merchant's  Business  on  C.  I.  F. 
Terms — Characteristics  the  Export 
Merchant  Must  Possess — The  Export 
Merchant  Needs  Capital — How  Export 
Merchants  Pay  Manufacturers  —  How 
Customers  Pay  Merchants. 
II.   Export   Merchant's  Relations  at  Home 

AND  Abroad 13 

Branches  at  Home — Branches  Abroad — For- 
eign Agencies — ^The  Export  Merchant 
Practises  Barter — Relations  with  Manu- 
facturers Not  Always  the  Best — The  Pio- 
neers in  Foreign  Markets — Cooperation 
with  Manufacturers. 


Part   II 
The   Export   Commission   House 
I.   What  Is  an  Export  Commission  House?.  .  27 
The   Primary   Function   of   the   Commission 
House — The    Two    Methods    by    Which 
the  Importer  Buys — ^The  F.  O.  B.  Basis 
— Advantages    of    Buying    on    F.    O.    B. 
Prices — The  C.  I.  F.  Basis — Relations  of 
Commission   House  with  Manufacturer — 
Comparison   with   Export   Merchant  and 
Manufacturer's  Agent. 

II.   Organization,  Field  and  Methods 38 

Home  Organization — Branch  Offices  Abroad 
— Specializing  in  Products — Specializing 
in  Markets — Three  Methods  of  Getting 
Sales — Salesmen  the  Best  Method — How 
Service  Is  Sold — Rates  of  Commission — • 
Staples  Seldom  Bought  on  Commission 
Basis — How  the  Commission  House  BuyS 


— How  the  Buyer  Compares  Prices — How 
Manufacturers  Sell  to  Commission  Houses 
— How  Sales  Are  Finance  d — Terms 
Usually  Granted  by  Commission   Houses. 

in.   The  Routine  of  the  Export  Commission 

House  59 

Getting  Credit  Information — ^The  Order 
Turned  Over  to  Buyer — Where  the  Buyer 
Must  Decide — The  Work  of  the  Shipping 
Clerk — The  Work  of  the  Bookkeeping 
Department — The  Invoicing  Department 
— When  the  Shipment  Is  on  Board — The 
Invoice — Financing  F.  O.  B.  Business — 
Financing  C.  I.  F.  Business. 

IV.    Manufacturers'  Agencies 76 

Three  Types  of  Manufacturer's  Agents — 
How  the  Commission  House  Acts  as  Agent 
— Advantages  of  the  Commission  House  in 
Agency  Work — ^The  Future  of  the  Export 
Commission  H  o  u  s  e — ^Why  Commission 
Houses  Cannot  Be  Eliminated. 


Part   III 
The   Export   Forwarder 
I.   The  Forwarder's  Services  at  Seaboard.  ...   87 
The  Manufacturer's  Forwarding  Problem — 
How   Forwarder   Assists    Manufacturer — 
Shipping  to  Seaboard  by  Rail — From  Rail- 
road Terminal   to  Steamer — Receiving  at 
Dock — Export  Declaration — Consular  In- 
voices— Other  Documents — Bills  of  Lading 
and  Insurance — Cooperation  between  For- 
warder and  Manufacturer — How  the  For- 
warder Combines  Shipments — Forwarder's 
Bills  of  Lading. 
II.    Foreign  and  Special  Services  by  the  For- 
warder      99 

How  a  Foreign  Agent  Assists  in  Financing 
— Should  a  Forwarder  Engage  in  Other 
Activities? — Steamship  Lines  as  Forward- 
ers— Special  Services  by  Forwarders — 
Assistance  on  Through  Shipments — Mis- 
cellaneous Activities — Forwarder  Essential 
to  Trade  Expansion. 


Pioneers  of  Export  Trade 

THE  pioneers  of  American  industry,  as  a 
rule,  have  not  been  the  pioneers  of  export 
trade.  Two  or  three  corporations,  it  is  true, 
have  pushed  into  every  corner  of  the  vv^orld;  but 
the  great  majority  of  our  manufacturers  have 
been  content  to  cut  short  their  selling  activities  at 
the  nation's  edge. 

To  the  export  house  has  fallen  the  task  of  ex- 
ploiting the  great  market  that  lies  beyond  our 
frontiers.  In  doing  this  the  export  house  has 
served  the  manufacturer  in  many  capacities — as 
his  adviser,  his  salesman,  his  shipper  and  his  finan- 
cier. The  export  house  has  been  the  middleman 
between  American  producer  and  foreign  pur- 
chaser, the  link  between  factory  and  consumer. 
In  this  way  it  has  laid  the  foundations  for  many 
of  our  export  businesses. 

A  building  must  conform  to  the  strength  and 
shape  of  its  foundations.  Many  an  export  trade 
has  conformed  to  the  foundations  that  the  export 
house  has  laid  for  it.  That  this  pioneer  work  of 
the  export  house  has  been  efficient  is  attested  not 
only  by  the  prosperity  of  the  businesses  it  has  estab- 
lished for  others,  but  also  by  the  fact  that  many 
manufacturers  are  content  to  continue  the  export 
house  in  control  of  their  trade  overseas. 

The  export  house  has  been  successful;  i'js 
methods  are  deserving  of  study  by  all  others  who 
would  also  be  successful  in  foreign  fields. 


Part  I 
THE  EXPORT  MERCHANT 


operations  of  the  Export  Merchant 

THE  export  merchant  long  antedated  the 
export  commission  merchant.  The 
ancient  Phoenicians,  sallying  forth  from 
their  bustling  seaports  with  bulging  cargoes 
of  oil,  grain,  wines  and  spices,  were  export 
merchants.  So  also  the  later  traders  of 
Venice   and    the   men   who 

ventured     their     lives     and     The  Export  Merchant 
,    .     ,  .      ,  Antedated  the  txport 

their  fortunes  m  the  voyages  Commission  Merchant 
from  Europe  to  the  rich 
East  and  later  to  the  shores  of  the  New  World 
were  following  the  export  merchant's  trade. 
It  was  the  tradesmen's  desire  to  shorten  the 
route  from  Europe  to  the  Indies  that  led  to 
the  discovery  of  America,  and  it  was  a  firm 
of  export  merchants  that  provided  the  private 
capital  embarked  in  that  enterprise. 

From  those  early  days  to  the  present,  the 
export  merchant  has  built  his  business  about 
the  same  principle — the  purchase  of  mer- 
chandise where  he  can  get  it  cheapest  and  the 
resale  of  it  to  his  foreign  customer  at  his  own 
price.  Common-sense  dictates  that  that 
price  be  a  reasonable  one  and  likely  to  com- 
pare with  competitive  offers.  It  is  in  this 
matter  of  prices  that  the  merchant  has  had 


FOREIGN  TRADE 


to  exercise  much  judgment  and  to  study  his 
customers,  individually  and  carefully.  The 
conclusion  he  arrived  at  has  usually  embodied 
a  very  human  desire  to  trade  as  profitably  as 
possible,  tempered  always  by  a  due  recogni- 
tion of  the  particular  customer's  idiosyn- 
crasies. 

The  export  commission  merchant  came 
into  existence  at  a  later  date.  As  has  been  ex- 
plained in  a  previous  Unit, he  differs  in  method 
of  operation  from  the  export  merchant.  If 
he  keeps  strictly  to  his  function,  the  export 
commission  merchant  executes  orders  only  for 
a  stated  commission.  He  buys  or  sells  nothing 
for  his  own  account,  and  closes  a  transaction 
only  when  he  has  received  the  necessary 
authority  to  do  so  from  both  seller  and  buyer. 
He  assumes  wittingly  no  risk  beyond  the  im- 
portant one  of  his  customer's  credit.  To  be 
sure,  no  business  is  free  from  unexpected  and 
unnecessary  expenses  arising  from  negligence, 
bad  faith  and  other  unforeseen  circum- 
stances; the  export  commission  merchant  has 
his  full  share;  but  with  him  they  are  rather 
to  be  dreaded  than  actually  expected.  In  the 
long  run  they  probably  have  a  more  percept- 
ible effect  upon  his  disposition  than  upon  his 
profit  and  loss  account. 

The  merchant,  in  contradistinction  to  the 
commission  merchant,  need  not  wait  for  defi- 


EXPORT  HOUSES 


nite  orders  before  buying  such  articles  as  in  his 
judgment  offer  a  good  market.  He  may  have 
very  good  reason  for  believing  that  lumber, 
provisions,  canned  goods,  or  a  number  of  other 
articles  are  likely  to  advance  in  value  in  the 
near  future.  In  these  cases  he  will  frequently, 
though  as  a  rule  cautiously,  speculate.  He 
may  do  the  same  as  regards  chartering  vessels 
or  booking  freight  space.  In  fact,  his  ability 
to  provide  freight  space  for  a  given  shipment 
is  frequently  of  the  greatest  assistance  in  the 
securing  of  orders. 

Today,  however,  both  export  merchant 
and  export  commission  merchant  usurp  to  a 
large  extent  the  functions  of  each  other.  It 
may  be  doubted  whether  there  is  a  firm  of  ex- 
port merchants  in  existence  which  does  not 
often  act  on  commission,  or  whether  there  is 
an  export  commission  merchant  able  to  resist 
the  temptation  to  act  occasionally  as  an  export 
merchant. 

Export  merchants  In  this  country,  generally 
speaking,  conduct  their  business  much  on  the 
same  lines  as  do  the  merchants  of  England, 
Germany  and  other  European  countries, 
though  perhaps  in  the  two  countries  named 
there  is  a  greater  tendency  to  combine  the 
functions  of  the  export  merchant  more  inti- 
mately with  those  of  the  banker.  Such  con- 
cerns extend  credits  to  their  foreign  customers, 


FOREIGN  TRADE 


charging  a  commission  and  interest,  but  fre- 
quently leaving  buyers  free  to  purchase  direct 
from  manufacturers  or  specialists  in  given 
articles.  In  such  cases,  the  purveyors  collect 
the  invoice  values  from  the  export  banking 
house. 

The  organization  of  the  export  merchant's 

business     follow^s     a     logical     arrangement. 

There  is  the  head  ofRce  at  some  important 

ocean  port,  one  of  the  great 

How  the  Merchant's      assembling    and    distributing 

Business  Is  Organtzed         .  °  ,         ,     ,         ,      j 

pomts  at  seaboard  where  land- 

and  sea-transportation  facilities  combine  to 
serve  the  persistent  demands  of  international 
commerce.  In  this  head  office,  the  general 
policy  of  the  concern  is  directed  and  de- 
veloped, credits  to  customers  are  determined, 
finances  are  controlled  and  a  general  super- 
vision of  the  entire  organization  is  exercised. 
Here,  also,  most  of  the  business  is  directed 
and  the  principal  buying  and  shipping  are 
done. 

Merchants  who  maintain  relations  with  dif- 
ferent parts  of  the  world  usually  divide  their 
forces  into  geographical  departments,  each 
dealing  with  its  own  "territory"  and  acting  in- 
dependently of  the  others.  An  export  mer- 
cantile house,  for  instance,  may  have  a  West 
Indies  department,  a  Brazil  department,  an 
Australian  or  a  European  department,  etc. 


AN  EXPORT  MERCHANT'S  HEAD  OFFICE 

From  their  New  York  office,  W.  R.  Grace  &  Company   direct 
their  business  in  various  parts  of  the  world 


EXPORT  HOUSES 


Such  a  division  of  labor  would  suggest  itself, 
in  any  case;  in  the  export  trade  it  is  doubly 
necessary.  Most  of  the  clerical  work — and  it 
is  just  here  that  so  many  annoying  and  ex- 
pensive mistakes  arise — is  necessarily  in- 
trusted to  subordinates,  young  men  in  course 
of  training,  some  of  them  embryo  export 
merchants  themselves,  but  prone  to  more  than 
occasional  errors.  The  requirements  of  for- 
eign countries  in  the  intricate  details  of  docu- 
mentation vary  in  many  important  respects. 
Markets  taking  the  same  article  may  each 
want  it  packed  differently  and  under  different 
brands;  while  customs  regulations  vary  so 
widely  that  the  penalty  for  an  infraction  may, 
for  the  same  offense,  range  from  a  nominal 
fine  in  one  port  to  a  confiscation  of  the  goods 
and  heavy  penalty  for  the  ship  in  another.  By 
encouraging  the  staff  of  a  particular  depart- 
ment to  concentrate  energies  and  intellects  on 
the  special  features  of  one  market,  or  one 
group  of  markets,  the  opportunity  for  mis- 
takes is  minimized  and  better  results  are  ob- 
tained in  every  respect.  The  workers  then 
become,  to  a  large  degree,  specialists  in  the 
requirements  of  those  markets. 

Generally  the  export  merchant  confines  his 
operations  within  certain  geographical  zones, 
and  ventures  outside  of  these  only  with 
caution.     For  instance,  one  firm  will  operate 


FOREIGN  TRADE 


in   Australasia,  another  in  South  Africa,  a 

third  on  the  east  coast  of   South  America, 

another  on  the  west  coast,  or  in  some  part  of 

the   Orient,    and   many   ex- 
The  Theater  of  the  ^^^.^  g^j  ^^   j^  ^  f^^ 

Merchant  s  Operations      ,    .  ..... 

their    energies    within    the 

circumscribed  area  of  the  West  Indies. 

The  reasons  for  specializing  in  certain  ter- 
ritories are  various.  Experience  has  shown 
that,  with  interests  scattered  in  too  many 
places,  far  apart  and  differing  widely  from 
each  other,  there  Is  a  serious  loss  in  efficiency. 
It  is  also  true  that  one  grand  division  of  the 
world's  commerce  generally  offers  sufficient 
opportunities  to  engage  the  undivided  and 
specialized  attention  of  the  most  energetic. 
Furthermore,  there  is  a  recognition — not  ex- 
pressed nor  even  tacit,  but  rather,  subcon- 
scious— that  the  practise  of  leaving  to  certain 
groups  of  merchants  particular  spheres  of  in- 
fluence acts  as  a  check  on  needless,  ignorant 
and  reckless  competition.  There  are,  indeed, 
concerns  which  profess  to  operate  in  every 
part  of  the  world  open  to  sea-borne  traffic; 
but  it  would  be  difficult  to  point  to  a  single 
one  of  such  houses  which  approaches  pre- 
eminence in  any  one  foreign  market. 

We  must  except,  of  course,  that  class  of 
specialists  handling  staple  commodities,  such 
as  grain,  cotton,  metals.    While  they  are  both 


EXPORT  HOUSES 


exporters  and  merchants,  they  are  not  strictly 
classed  as  export  merchants. 

A  large  part  of  the  export  merchant's  busi- 
ness is  necessarily  done  on  modern  C.I.F. 
(cost,  insurance  and  freight)  terms.  That  is, 
he   agrees  to  furnish   the 

goods,  provide  transporta-     '^J'' ^'/'^'^f'  ^«^'«^^^ 
°  ,  -  ,.         On  C.  I.  F.  Terms 

tion  to  destmation  and  m- 

sure  against  marine  risks.  He  does  not  agree, 
as  is  frequently  and  mistakenly  supposed,  to 
deliver  the  goods  at  the  destination.  His  obli- 
gation under  his  contract  of  sale  ends  when  the 
goods,  properly  protected  by  marine  insur- 
ance, are  put  on  board  the  vessel  at  loading 
port  and  the  rate  of  freight  fixed.  If  the 
freight  is  payable  abroad,  it  is  deducted  from 
the  C.I.F.  value  and  the  customer  charged 
with  the  balance  of  the  invoice. 

This  method  of  buying  offers  many  ad- 
vantages to  the  foreign  purchaser.  He  knows 
precisely  what  the  goods  will  cost  and  there- 
fore how  much  he  must  ask  his  own  cus- 
tomers. The  risk  in  providing  tonnage  or 
freight  room  is  eliminated  for  him,  and 
fluctuations  in  freight  rates  have  no  bearing 
on  his  price. 

It  is  true  that  the  commission  merchant  can 
also  offer  tonnage  or  freight  room  when  offer- 
ing goods,  but,  in  the  nature  of  his  business, 
he  cannot  do  more  than  cable  the  freight  rates 


8 FOREIGN  TRADE 

quoted  and  current  at  the  time.  If  his  offer 
is  accepted  and  he  neglects  to  close  the  freight 
space  before  rates  decline,  he  would  have  to 
give  his  client  the  benefit  of  the  reduction; 
vs^hile,  if  they  advanced,  he  would  assuredly 
have  to  assume  the  loss  himself. 

The  export  merchant  naturally  prefers  to 
protect  himself  by  securing  the  necessary  op- 
tions when  he  can;  but,  in  normal  times,  he 
is  ready  and  willing  to  take  a  chance  rather 
than  defer  action  and  keep  his  prospective 
buyer  impatiently  waiting  for  an  offer.  In 
many  cases  the  export  merchant's  offer  has 
been  received,  considered  and  accepted  before 
the  commission  merchant  is  even  ready  to 
cable. 

In  full  cargo  business  the  merchant,  by 
reason  of  his  readiness  to  rely  on  his  own  judg- 
ment, has  a  further  advantage.  While  the 
commission  merchant  must  wait  to  obtain  re- 
fusal of  a  vessel,  or,  failing  this,  content  him- 
self with  cabling  a  mere  "indication"  of  what 
can  probably  be  done,  the  export  merchant  is 
not  hampered  by  these  restrictions.  After 
weighing  his  prospects  pro  and  con  and  with 
a  minimum  of  delay,  he  will  make  his  decision 
and  cable  his  offer  accordingly. 

Needless  to  say,  the  merchant  is  not  neces- 
sarily of  wider  experience  or  a  higher  order 
of  business  intelligence  than  the  commission 


EXPORT  HOUSES 


merchant.  Numerous  foreign  concerns  leave 
their  interests  entirely  in  the  hands  of  the 
commission  men  with  satisfactory  results. 

It  is  obvious  that  the  export  merchant  must 
frequently  assume  very  serious  responsibilities 
and     risks.      The    only    way    to    minimize 
these  is  to  learn  from  experi- 
ence  and   to  watch   closely   all     Characteristks  the 

„      .         ,  .      1      .  txport  Merchant 

matters    affectmg   his   busmess.     Must  Possess 

He    must    keep    intimately    in 

touch  with  both  railway  and  ocean  freights 

and  the  tonnage  situation  generally.  He  must 

be  ever  on  the  watch  for  incidents — financial, 

political,    economic — likely    to      affect    his 

markets  or  the  sale  of  any  of  the  innumerable 

articles  he  exports.     In  addition  he  must  be 

gifted  with  a  certain  amount  of  imagination, 

the  same  imagination  that  urged  the  early 

Phoenician  merchants  toward   untried    risks 

and  across   uncharted   seas.     The  merchant 

who  is  content  to  follow  the  beaten  tracks  of 

his  predecessors  and  competitors  may  meet 

with  a  certain  measure  of  success,  but  he  will 

never  rise  above  mediocrity. 

The  export  merchant  of  to-     Ij"' ^^'"''^  Merchant 
J  ^  J  •     t     Needs  Capital 

day  must  command  capital 

commensurate  with  his  undertaking  and  be 

jealously   careful  of   his   financial   standing. 

One  of  small  capital  will  have  a  hard  and 

long  fight  ahead  of  him  before  he  can  hope 


lo FOREIGN  TRADE 

for  the  desired  success,  and  to  attain  that  suc- 
cess he  must  be  gifted  with  energy  and  busi- 
ness acumen  above  the  average.  A  sudden 
change  in  prices  or  in  freight  rates  or  in  a 
foreign  situation  may  wipe  out  his  resources 
within  a  few  hours,  leaving  him  without  the 
means  to  retrieve  his  misfortune. 

Rare  indeed  is  the  export  merchant  who, 
reviewing  his  operations  even  over  a  preced- 
ing 12  months,  finds  therein  nothing  but  an 
unbroken  list  of  ventures  brought  to  success- 
ful conclusion.  The  pitfalls  and  snares  which 
infest  his  pathway  cannot  always  be  seen  or 
guarded  against;  sometimes,  even  when  in 
plain  sight,  they  cannot  be  avoided.  On  these 
occasions  he  must  stoically  make  the  best  of  it 
and  face  his  losses  with  such  equanimity  as  he 
can  command. 

The  basis  on  which  the  export  merchant 

finances  his  operations  is  credit;  this  is  true 

whether  his  capital  be  in  eight  figures  or  in 

four.  He  purchases,  almost 

How  Export  Merchants     without  exception,  for  pay- 

Fay  Manufacturers  .        . 

ment  m   three,   ten  or  30 

days,  according  to  the  custom  of  the  trade. 
A  few  very  large  manufacturers  make  it 
a  rule  to  demand  from  all  buyers  payment  in 
exchange  for  ship's  receipts;  some  manufac- 
turers and  packers  at  a  distance  from  the  sea- 
board draw  for  the  invoice  value  of  their 


EXPORT  HOUSES ii 

goods  on  demand  or  up  to  30  days'  sight,  as 
soon  as  the  shipment  leaves  their  hands.  But 
the  majority  of  sellers  for  export  make  de- 
livery of  their  goods  as  instructed  and  render 
their  bills  to  the  merchants  in  the  full  assur- 
ance that  payment  vi^ill  be  forthcoming  at  the 
proper  time. 

As  regards  reimbursement,  the  merchant 
arranges  to  receive  payment  from  his  foreign 
buyers  in  one  of  the  following  w^ays: 

1.  He  debits  the  customer  on  his  books 
under  an  engagement  on  the  part  of  the  buyer 
to  remit  the  value  within  a  stated  time;  gen- 
erally the  duration  of  this  period 

is  stipulated  at  the  inauguration     ^^w  Customers 

,  ^t    .        ^     .  ray  Merchants 

of  their  relations. 

2.  He  draws  on  buyers  direct  at  so  many 
days'  sight  or  date.  In  this  case,  he  usually 
negotiates  the  draft,  selling  it  at  the  current 
rate  for  such  bills  to  a  foreign  exchange  house 
or  bank.  In  this  way,  he  receives  his  money 
without  delay,  though  remaining  liable  for 
the  amount  until  the  draft  is  paid. 

3.  He  draws  on  the  customer  and  sends  the 
draft,  for  collection,  through  a  bank  or  to  his 
own  branch  house  or  to  the  agent  at  destina- 
tion. When  collected,  the  money  is  remitted 
to  him  or  disposed  of  as  he  may  instruct. 

4.  He  draws  under  letter  of  credit,  opened 
by  his  buyers,  with  a  bank  situated  at  desti- 


12 FOREIGN  TRADE 

nation  or  in  some  financial  center  (notably 
London).  Not  infrequently  he  is  asked  to 
draw  at  60  to  90  days  on  a  private  mercantile 
house,  generally  situated  in  some  center  such 
as  London,  Hamburg  or  Paris. 

5.  He  may  reimburse  himself,  for  the  time 
being,  by  availing  of  credits  extended  to  him 
by  banks  or  banking  houses  at  home  or  abroad. 
These  are  open  credits  and  the  bank  relies 
solely  on  the  merchant's  promise  to  cover  its 
acceptance  before  maturity.  This  is  an  ex- 
pensive way  of  financing,  being  practically 
equal  to  doing  business  on  borrowed  money. 

6.  He  makes  the  customer  deposit  cash 
before  shipment,  but  this  is  a  rare  exception. 

7.  If  the  foreign  buyer  be  himself  an  ex- 
porter of  produce,  as  is  sometimes  the  case, 
there  may  be  an  exchange  of  commodities,  the 
buyer  covering  his  purchases  by  shipments  of 
sugar,  cofifee,  hides  or  other  articles.  This  is 
the  ideal  arrangement  for  conducting  a  for- 
eign business,  provided  the  customer's  ship- 
ments keep  pace,  in  value  and  in  time,  with 
his  purchases. 


II 


Export  Merchant's  Relations  at  Home 
and   Abroad 

AN  important  feature  of  the  export  mer- 
chant's business  is  his  organization  of 
branch  houses,   agents   and   representa- 
tives.    These  are  sometimes  established  not 
only  abroad  but  in  the  home  country  as  well, 
where,  at  various  points,  it  has  been  found 

desirable  to  be  personally  rep-     „ 

J       T-.        •  •>       ^        Branches  at  Home 

resented,      ror   mstance,   many 

New  York  houses  have  branches  at  important 
shipping  points  such  as  Baltimore,  Savannah, 
New  Orleans,  San  Francisco,  as  well  as  agents 
in  certain  interior  centers  of  industry.  In  the 
United  States  the  great  distances  from  coast  to 
coast  would  seem  to  make  this  a  necessity. 
However,  distances  and  the  danger  of  delays 
in  communications  are  not  the  sole  reasons  for 
establishing  branches.  This  is  shown  by  the 
fact  that  even  in  a  small  area  like  Great 
Britain,  export  merchants  with  head  offices 
in  London  frequently  establish  important 
branches  or  agencies  at  such  centers  as  Liver- 
pool, Manchester,  Newcastle  and  Glasgow. 
Everywhere,  the  personal  equation  counts 
heavily  for  failure  or  success.  The  "man  on 
the  spot"  is  generally  at  an  advantage. 

13 


14 FOREIGN  TRADE 

Branch  houses  abroad  differ  from  the  home 
office  only  in  degree.  The  efforts  and  re- 
sponsibilities of  a  branch  are  confined  to  its 

r.       ,      A,       ,    own  territory,  and  generally  in- 

Branches  Abroad       i    j         i        •  i         r 

elude     the     important    task    of 

choosing  subagents  in  the  outlying  districts 

who,  in  turn,  report  and  are  responsible  to  the 

branch.    It  is  not  unusual  for  a  branch  house 

to  be  managed  by  one  of  the  partners  of  the 

firm.    Naturally,  each  entity  must  "nurse"  its 

own  customers,  find  new  ones,  watch  very 

carefully  and  report  to  the  nearest  main  office 

the  standing  of  the  local  business  community, 

advise  as  to  credits,  listen  to  the  complaints 

and  assuage  the  ire  of  dissatisfied  customers 

and,  in  general,  assume  the  position  of  the 

second-in-command,  who,  Kipling  tells  us,  is 

appointed  principally  to  accept  the  blame  for 

everything  that  goes  wrong. 

The  branch  keeps  a  watchful  eye  on  the 
house's  competitors,  complaining  indig- 
nantly if  undersold,  but  willing  to  accept  full 
credit  when  satisfactory  orders  testify  other- 
wise. It  is  expected  to  be  constantly  in- 
formed as  to  stocks  on  the  spot  and  to  foresee, 
ahead  of  competitors,  a  demand  for  certain 
merchandise. 

Guided  by  the  information  of  this  nature 
received  from  its  branches,  the  head  office 
regulates  its  long  or  short  interest  in  a  variety 


EXPORT  HOUSES i^ 

of  goods,  selling  or  buying  ahead  as  circum- 
stances and  advices  from  abroad  may  war- 
rant. Export  merchants,  other  than  specialists 
in  a  very  few  articles,  do  not  as  a  rule  carry 
stocks  in  the  United  States.  The  nearest  they 
come  to  it  is  in  this  buying  from  manufacturers 
in  anticipation  of  requirements.  In  such  cases, 
of  course,  the  goods  usually  remain  at  the  fac- 
tories or  packing-houses  and  are  delivered  to 
the  ocean-going  vessel  when  ordered  by  the 
merchants.  Some  branch  houses,  however, 
especially  in  locations  far  distant  from  the 
source  of  supply,  frequently  carry  consider- 
able stocks  of  readily  merchantable  commod- 
ities, in  the  manipulation  of  which  discretion 
and  judgment  are  required.  In  addition,  the 
branch  house  attends  to  the  purely  physical 
matter  of  taking  charge  of  freshly  discharged 
merchandise,  and  sees  to  its  delivery  to  the 
buyers,  particularly  to  those  at  a  distance. 
The  dunning  of  recalcitrant  or  unfortunate 
debtors  is  another  and  an  unpleasant  task 
which  all  branches  or  agencies  have  to  assume. 
It  must  be  said,  to  the  credit  of  most  of  the 
responsible  export  merchants,  that  they  err, 
if  anything,  on  the  side  of  complaisance,  by 
"carrying"  the  customer  and  rarely  proceed- 
ing to  extreme  measures  with  honorable 
debtors,  so  long  as  there  is  any  evidence  of 
ability  and  an  honest  desire  to  pay. 


i6 FOREIGN  TRADE 

Foreign    "agencies"    are    established    for 

very   much    the    same    purposes    as    branch 

houses.    After  an  apprenticeship  they  some- 

.       .       times  attain  to  the  same  dignity. 
Foreign  Agenaes     rp,         ,    ^,  .  ° 

1  hough  these  agencies  are  not  so 

closely  identified  with  the  head  office,  they 
are  expected  to  neglect  no  opportunity  to  ad- 
vance the  interests  of  the  parent  concern. 
There  are  exclusive  agencies  and  non-exclu- 
sive agencies.  There  is  nothing  to  prevent  the 
latter  from  acting  for  one  or  more  additional 
interests  provided  no  two  accounts  clash.  For 
instance,  a  concern  established  in  Melbourne, 
while  serving  as  agent  for  a  New  York  ex- 
porter could  consistently  represent  a  fire  in- 
surance company,  a  steamship  line  or  other 
interest  at  the  same  time.  It  could  not  serve 
another  American  export  merchant  nor  the 
manufacturer  of  a  competing  line  of  goods. 
The  duty  of  a  foreign  "agent"  to  his  "prin- 
cipal" consorts  with  his  own  interests,  since 
his  remuneration  and  tenure  are  usually  de- 
pendent on  the  volume  and  success  of  his 
sales.  In  fact  the  foreign  agent  of  an  export 
house  differs  but  slightly  from  any  other  kind 
of  selling  agent.  He  canvasses  his  trade  for 
orders,  cables  or  telegraphs  to  his  principals 
for  prices,  and  books  as  much  business  as  pos- 
sible. The  best  type  of  agent  will  go  beyond 
his  mere  perfunctory  duties,  and  in  the  inter- 


EXPORT  HOUSES 17 

est  of  all  concerned  will  take  upon  himself 
more  of  those  functions  which  are  obligatory 
upon  a  branch  house,  keeping  his  principals 
well-informed  on  all  matters  of  mutual  con- 
cern and  doing  his  utmost  to  forward  and 
foster  the  common  interest.  This  is  the  type 
of  agent  for  which  export  merchants  are 
always  looking. 

Some  export  houses  have  traveling  salesmen, 
who  are  sent  out  from  the  head  office,  but  the 
larger  concerns  usually  rely  upon  their  branch 
houses  to  attend  to  this  phase  of  the  business. 
These  foreign  branches  send  traveling  men  to 
such  towns  as  are  not  covered  by  the  regular 
agent  or  representative.  Furthermore,  it  is  not 
unusual  for  the  head  office,  working  in  con- 
junction with  the  manufacturer,  or  sometimes 
a  combination  of  two  or  three  manufacturers, 
to  use  a  special  traveling  salesman  to  introduce 
and  push  the  sales  of  given  articles. 

In  general,  the  assistance  on  which  the  ex- 
porter relies  to  advance  his  business  is  that 
which  comes  from  the  principal  branch  offices 
abroad.  These,  in  turn,  rely  on  their  own 
subsidiary  agents  and  representatives.  Adver- 
tising is  limited,  though  some  exporters  issue 
at  stated  intervals  a  trade  journal  and  list  of 
prices  current,  which,  being  distributed  in  the 
proper  quarters,  serve  as  an  advertisement. 

Trade,  in  its  fullest  development,  must  be 


18 FOREIGN  TRADE 

mutual.    The  essence  of  international  trade  is 
barter,  and  the  United  States  cannot  reason- 
ably expect  the  enormous  increase  in  its  export 
trade,  for  which  the  press  in- 
The  Export  Merchant     gi^tently   clamors,   until    it  is 
Practises  Barter  ,  j         i  •  j 

also  ready  to  buy  an  mcreased 

amount  of  foreign  products.  It  will  be  found 
that  the  nations  which  are  the  leading  export- 
ers of  competitive  merchandise  are  usually  the 
most  extensive  buyers;  and  that  the  smaller 
purchaser  must  remain  content  with  a  propor- 
tionately smaller  share  of  exports. 

Especially  has  there  been  a  tendency  to 
magnify  the  waiting  opportunities  in  South 
America.  That  continent,  no  doubt  much  to 
the  surprise  of  its  inhabitants,  was  recently 
depicted  in  the  same  light  as  in  the  early  days 
of  its  discovery — an  "El  Dorado"  promising 
a  golden  return  to  the  hardy  explorer  of  its 
untrodden  wilds!  It  was  assumed  that  the 
South  American  continent  had  been  almost 
neglected  by  the  exporters  of  the  United  States. 
The  facts  are  altogether  to  the  contrary,  and  it 
is  doubtful  if  there  is  in  the  southern  conti- 
nent a  single  town  or  village  dignified  by  the 
possession  of  a  general  store  which  is  not 
reached  from  time  to  time  by  the  export  mer- 
chant's representative. 

Unfortunately,  the  attitude  between  ex- 
port merchants  and  manufacturers  has  not 


EXPORT  HOUSES 19 

invariably  been  of  the  best.  Each  has  com- 
plained at  times  of  unfair  treatment  by  the 
other.  In  years  past  a  few  exporters  of  easy 
principles  may  have  taken  ad- 

vantage   of  the   manufacturers'     ^f^^^onsM 

^       .,.     .  .  ,  Manufacturers lyot 

unfamiharity  with  export  cus-  Always  the  Best 
toms  to  the  extent  of  collecting 
annual  salaries,  or  usurious  commissions  for 
services  either  entirely  neglected  or  but  poorly 
performed,  and  perhaps  in  other  ways.  Such 
cases,  however,  were  exceptional  and  the 
abuse  has  pretty  well  run  itself  out. 

The  principal  grievance  that  a  manufac- 
turer can  now  hold  against  the  merchant  is 
that  the  latter  charges  for  a  service  which  the 
former  thinks  he  can  perform  equally  well. 
So  manufacturers  have  proposed  the  cutting 
out  of  the  merchant,  thus  saving  his  commis- 
sion or  margin.  Some  manufacturers  have 
acted  on  this  inspiration  and  express  satisfac- 
tion with  the  result.  Whether  this  is  really 
as  roseate  as  is  claimed  may  be  doubted.  Fac- 
tories and  mills  have  a  habit  of  charging  cer- 
tain expenses  such  as  interest,  telegraph  tolls 
and  similar  items — whether  applying  on  for- 
eign or  domestic  business — to  one  general  ex- 
pense account  where  the  amounts  expended  on 
foreign  trade  are  entirely  lost  sight  of.  The 
merchant,  on  the  other  hand,  must  watch  his 
interest     and     expense     accounts     carefully, 


20 FOREIGN  TRADE 

knowing  that  they  represent  an  appreciable 
percentage  on  each  sale. 

Merchants     and     commission     merchants 
have  invariably  been  the  pioneers  in  foreign 
markets.     In  practically  every  instance  man- 
ufacturers have  assured  their  en- 
The  Pioneers  in  j^^^  f^^^j       markets  through 

Foreign  Markets      /  ^  ,  .  ^ , 

the   agency    and    enterprise,    and 

frequently  on  the  invitation,  of  the  export 
houses.  From  the  outset,  they  have  received 
payment  for  their  goods  as  soon  as  loaded  on 
vessel — frequently  before,  as  for  instance, 
v^hen  shipment  may  have  been  delayed  at  the 
seaboard.  The  exporter  secured  the  foreign 
buyer,  shipped  the  goods,  financed  the  trans- 
action and  generally  waited  three  to  six 
months  for  his  money! 

One  would  think  that  this  method  of  sell- 
ing abroad  would  have  proved  satisfactory; 
but  some  manufacturers,  after  enjoying  for  a 
year  or  two  the  benefits  and  facilities  afforded, 
including  the  advantage  of  the  exporter's  ex- 
perience, advice  and  education,  have  deliber- 
ately pushed  the  exporter  to  one  side  and  ap- 
proached and  sold  his  customers  direct.  In 
occasional  cases  they  have  even  extended  long 
terms  of  credit  to  the  foreign  buyer  after  de- 
clining to  allow  anything  but  cash  terms  to 
the  export  merchant  himself.  Other  manu- 
facturers, and  these  are  far  in  the  majority, 


EXPORT  HOUSES  21 

continue  to  sell  through  the  exporters  and 
usually  their  relations  are  mutually  satisfac- 
tory. 

The  merchant  generally  is  willing  to  act 
for  manufacturers  in  foreign  markets.    If  the 
article  offered  is  of  sufficient  importance,  it 
is  customary  for  the  parties  to 
enter  into   a  working  contract,     (^^^operation  with 
rr.,  .  .  .  ,       .  Manufacturers 

Ihis  varies  with  circumstances. 

Perhaps  the  contract  in  most  general  use  is 
one  which  provides  that  the  merchant,  in  con- 
sideration of  an  exclusive  agency,  shall  guar- 
antee to  take  a  stated  quantity  of  the  article 
manufactured.  A  very  large  number  of 
nationally  known  manufacturing  concerns 
handle  their  foreign  sales  in  this  manner,  and 
long  years  of  experience  have  apparently  con- 
vinced them  that  a  more  equitable  arrange- 
ment can  scarcely  be  devised. 

There  are  other  articles  which  involve  in 
their  exploitation  much  heavier  demands  on 
the  merchant's  time.  Their  introduction 
calls  for  a  large  amount  of  missionary  work. 
In  such  cases  the  manufacturers  must  be  pre- 
pared to  stand  a  fair  share  of  the  extra  ex- 
pense as,  for  example,  the  salary  of  a  salesman 
especially  assigned  to  introduce  the  wares. 
Manufacturers  will  frequently  offer  the  ex- 
clusive agency  for  their  goods  in  exchange  for 
an  agreement  on  the  merchant's  part  to  intro- 


22 FOREIGN  TRADE 

duce  and  push  the  sale.  In  such  cases  the 
merchant  will  patiently  point  out  that  his 
force  is  already  fully  occupied;  but  that  he 
might  secure  a  suitable  man  to  visit  the  for- 
eign trade  in  the  manufacturers'  interest,  pro- 
vided they  will  pay  the  traveler's  salary. 
Usually  then,  the  manufacturers  will  depart 
in  dudgeon,  convinced  that  the  merchant  has 
been  trying  to  get  the  better  of  them;  and  this 
conviction  will  probably  color  their  attitude 
toward  the  export  merchant  in  general  until 
they  have  tried  the  experiment  themselves 
and  discovered  their  mistake. 

It  should  be  borne  in  mind  that  a  great 
deal  of  initial  hard  work  has  to  be  spent  in 
introducing  a  new  article,  even  though  the 
exporter's  foreign  representatives  have  the 
ear  of  the  buying  community.  If  a  certain 
success  results,  it  is  mainly  due  to  the  relations 
already  established  through  years  of  hard 
work  and  a  knowledge  of  local  conditions. 
The  advantage  to  manufacturers  of  dealing 
solely  through  export  merchants  (whether 
traders  or  on  commission)  ought  to  be  con- 
vincing. The  merchants  understand  the  dif- 
'ferent  markets  thoroughly;  they  have  sources 
of  information  as  to  buyers'  financial  stand- 
ing which  are  unknown  to  newcomers;  they 
have  trained  men  on  the  spot  who  know  how 
to  approach  and  handle  the  local  buyers  and 


EXPORT  HOUSES 23 

who  can  generally  be  depended  upon  to  push 
the  manufacturers'  interests  as  their  own.  A 
merchant  at  the  home  ports  attends  to  all  the 
details  connected  with  the  shipment,  as  well 
as  to  the  documentation — which  is  no  trivial 
matter.  A  slight  error  in  bill  of  lading  or 
consular  invoice  may  result  in  an  exorbitant 
fine  imposed  by  the  foreign  custom  house. 

The  manufacturer  may  conceivably  make 
occasionally  a  slightly  larger  profit  on  his 
product  by  selling  direct,  provided  every- 
thing goes  right.  Afifairs  not  infrequently  go 
wrong,  however;  and,  with  his  customer 
thousands  of  miles  away,  the  adjustment  is 
then  a  matter  of  difficulty  to  the  manufac- 
turer and,  in  most  cases,  of  heavy  pecuniary 
loss.  In  many  foreign  countries,  lawsuits 
drag  on  interminably  and  a  foreigner,  even 
on  the  spot,  has  but  a  meager  chance  of 
recovering. 

The  wise  manufacturer  will  generally 
prefer  to  trust  himself  and  his  goods  in  the 
hands  of  the  reputable  export  merchant,  in 
the  assurance  that  he  will  be  paid  for  his  goods 
promptly  and  avoid  the  manifold  ills  which 
beset  the  unwary  adventurer  into  unknown 
markets. 

There  are  one  or  two  colossal  manufactur- 
ing concerns  that  can  advantageously  handle 
their  own  exporting.     Their  operations  are 


24  FOREIGN  TRADE 

world-wide  and  they  have  their  own  corps  of 
trained  exporters,  just  as  some  of  them  have 
their  own  factories  for  making  packages,  and 
others  even  their  own  timberlands  for  sup- 
plying the  wood  packing-cases.  Their  names 
will  occur  to  any  one.  They  are  the  giants  of 
industry  and  trade.  They  belong  to  a  class 
by  themselves,  yet  there  is  cumulative  evi- 
dence that  they  find  that  foreign  offices  are  ex- 
pensive much  beyond  all  expectation,  com- 
pared with  their  home  agencies;  and  further, 
that  the  securing  of  able  and  reliable  person- 
nel for  these  foreign  offices  is  always  a  difficult 
problem. 


Part  II 

The  export 
commission  house 


What  Is  an  Export  Commission  House? 

THE  export  commission  house  has  been  in 
existence  in  the  United  States  for  the  past 
half-century,  or  ever  since  the  country 
began  to  engage  in  foreign  trade  of  any  con- 
sequence. In  Europe  this  type  of  middleman 
has  been  in  business  for  a  much  longer  period. 
Broadly  defined  the  export  commission 
house  is  a  concern  which  acts  primarily  as  the 
agent  of  an  importer  in  a  foreign  country  who 
is  desirous  of  purchasing  some 
article    made    here.     The    im-     The  Primary 

porter  appoints  the  export  com-    ^^^*^^J^  f/^Jf 

.     .       ,  I  •    ^1  •     1  Lommtsston  House 

mission  house  his  theoretical  at- 
torney to  do  such  work  as  his  branch  office 
would  be  called  upon  to  perform.  Misunder- 
standings between  manufacturers  and  commis- 
sion houses  have  been  due  to  the  fact  that 
manufacturers  often  forget  that  the  export 
commission  house  is  primarily  working  for  and 
being  paid  by  the  foreign  importer  and  that 
in  that  capacity  it  must  act  primarily  for  the 
benefit  of  its  employer,  the  foreign  importer. 
The  relations  between  the  foreign  importer 
and  the  export  commission  house  are  as  a  rule 
very  close.  This  is  necessarily  the  case  as  the 
foreign  importer  has  to  place  great  faith  in  the 

27 


28 FOREIGN  TRADE 

export  commission  house  and  must,  in  order 
that  this  confidence  be  not  abused,  know  the 
personnel  of  the  export  commission  house 
intimately.  Generally  these  relations,  once  es- 
tablished, continue  for  many  years,  and  it  is  not 
until  some  serious  mistake  is  made  by  the  ex- 
port commission  house  or  some  serious  ground 
for  complaint  given,  that  the  foreign  importer 
leaves  the  export  commission  house  he  has  been 
employing,  and  goes  to  some  one  else. 

The  foreign  importer  may  buy  from  the  ex- 
port commission  house  on  either  one  of  two 
bases.     First,  he  may  buy  on  what  is  com- 
monly called   an   F.O.B.  basis. 
The  Two  Methods     ^^-         ^^^    ^^  ^^^    commission 
by  Which  the  i  i  •  i     • 

Importer  Buys  j^^^^^  ^^  ^'^  ^^^  ^^^""^  ^^^  g^^" 

ing  it  discretion  to  purchase  at 

the  lowest  price  obtainable  such  goods  as  he 
requires,  the  export  commission  house  charg- 
ing the  foreign  importer  an  agreed-upon  com- 
mission on  his  various  disbursements.  Or 
second,  the  foreign  importer  may  request  a 
price  which  includes  the  commission,  or  profit 
of  the  export  commission  house,  added  to  the 
cost  of  the  goods,  the  insurance  and  the  freight, 
making  a  C.I.F.  price. 

In  the  first  method,  the  export  commission 
house  is  acting  as  a  buyer  or  agent  for  the  for- 
eign importer.  In  the  second,  it  is  acting  as  a 
principal. 


EXPORT  HOUSES 29 

As  regards  the  first  or  F.O.B.  method,  the 
services  performed  begin  with  the  request 
from  the  foreign  importer  for  information 
with    reference    to    the    details   and 

Tit      t?    f^     H 

prices  on  the  particular  lines  in  which  n^'  '  ' 
he  may  be  interested.  The  export 
commission  house  is  presumed  to  know  who 
are  the  best  manufacturers  of  this  article  and 
to  have  in  its  employ  men  who  have  a  general 
knowledge  of  manufacturing  in  this  country. 
Their  general  knowledge  is  supplemented  by 
all  the  available  trade  directories  and  trade 
magazines. 

After  the  necessary  information  for  the  for- 
eign importer  is  procured,  if  he  decides  to  pur- 
chase a  particular  machine  or  other  article,  he 
sends  the  export  commission  house  what  is 
commonly  called  an  indent  or  order.  This 
order  either  instructs  the  export  commission 
house  to  buy  from  a  particular  manufacturer 
or  leaves  it  to  the  discretion  of  the  export  com- 
mission house  where  to  place  the  business.  The 
foreign  importer  advises  the  export  commis- 
sion house  whether  to  attend  to  the  insur- 
ance or  whether  to  declare  the  shipment  under 
the  foreign  importer's  own  policy;  whether  to 
ship  as  soon  as  possible,  or  during  a  specified 
month,  and  how  to  reimburse  itself  for  its  out- 
lay. 

The  export  commission  house   then   pur- 


30 FOREIGN  TRADE 

chases  the  goods  and  attends  to  the  booking  of 
the  freight,  follows  up  the  manufacturer  to  see 
that  the  goods  are  shipped  in  accordance  with 
the  contract,  ships  them  when  ready,  pays  the 
freight,  attends  to  the  insurance  according  to 
instructions,  taking  care  also  of  any  custom 
house  formalities;  and  finally,  in  most  cases, 
draws  upon  the  buyer  to  reimburse  itself  for 
the  cost  of  the  goods  and  the  charges,  including 
its  buying  commission. 

Where  a  manufacturer  is  big  enough  to 
solicit  his  own  business  direct  from  the  foreign 
importer,  and  will  handle  all  the  details  of  his 
foreign  shipments,  the  services  of  the  export 
commission  house  have  oftentimes  not  been  re- 
quired. But  it  must  be  apparent  that  a  large 
and  competent  staff  is  required  to  handle  the 
various  classes  of  work  that  the  export  commis- 
sion house  performs,  and  it  is  hardly  within 
the  bounds  of  possibility  that  the  export  com- 
mission house  will  ever  be  eliminated. 

The  foregoing  illustration  is  based  on  the 

assumption   that  the  buyer  is  purchasing  a 

single  machine  or  one   article.     Sometimes, 

however,  the  foreign  importer 

ticulars  of  the  goods  he  wants, 
but  makes  up  his  indent  perhaps  20  or  30 
pages  long,  calling  for  an  assortment  of  goods, 
the  manufacturers  of  some  of  which  he  may 


EXPORT  HOUSES 3^ 

know  and  of  others  not  know,  leaving  it  gener- 
ally to  the  export  commission  house  to  pur- 
chase from  reliable  concerns  and  at  the  best 
prices.  In  the  case  of  indents  of  this  character 
the  services  of  the  export  commission  house  are 
absolutely  requisite  to  the  trade.  The  foreign 
importer  could  not  afford  to  have  each  manu- 
facturer ship  to  him  direct  for  the  reason 
that  steamship  lines  have  minimum  charges, 
which  would  burden  his  small  orders  with  ex- 
cessive freight  expense.  The  small  commis- 
sion charged  by  the  export  commission  house  is 
quickly  repaid  by  the  savings  that  the  importer 
is  able  to  effect  in  his  purchasing  ability,  in 
economical  handling  of  freights  and  general 
savings  in  charges. 

The  export  commission  house  does  not 
necessarily  stop  with  buying  and  shipping.  It 
may  be  that  the  foreign  importer  is  honest 
but  has  limited  resources,  and  cannot  trade  on 
his  own  capital  to  any  great  extent.  It  is  quite 
common,  therefore,  for  the  export  commission 
house  to  allow  the  foreign  importer  a  certain 
line  of  credit,  depending  on  his  standing  in  the 
community  and  the  amount  of  his  capital,  such 
credit  usually  taking  the  form  of  drafts  on  the 
foreign  importer  at  30,  60  or  90  days'  sight, 
with  instructions  to  the  bank  to  allow  the  for- 
eign importer  to  obtain  possession  of  the  docu- 
ments on  his  acceptance  of  the  draft.  As  a  rule, 


32 FOREIGN  TRADE 

the  export  commission  house  gets  no  additional 
commission  for  extending  this  credit.  This 
credit  is  one  of  the  greatest  abuses  to  which  the 
export  commission  house  is  subjected,  as  some 
foreign  importers  will  take  advantage  of  it  to 
overtrade  by  keeping  the  export  commission 
house  in  ignorance  of  their  purchases  and 
playing  one  export  commission  house  against 
another. 

It  should  be  explained  that  while  the  export 
commission  house  does  not  as  a  rule  charge  the 
foreign  importer  for  this  extension  of  credit, 
'  the  interest  involved  is  always  paid  by  the  for- 
eign importer,  and  is  either  charged  on  the  ex- 
port commission  house  invoice  or  (in  some 
countries)  is  added  to  the  face  of  the  draft  by 
the  banker  and  collected  by  the  bank  when  the 
draft  is  paid. 

In  the  case  of  goods  sold  on  a  C.I.F.  basis,  in 
which  the  export  commission  house  is  in  reality 
the  principal,  the  services  performed  are  very 
much  the  same  as  when  the  transac- 
TheC.  I.  F.      ^-Qj^  -g  ^^  ^^  F.O.B.  basis ;  but  in  mak- 
ing sales  on  this  basis,  the  export  com- 
mission house  is  naturally  in  competition  with 
others,  and  therefore  can  secure  only  the  mar- 
gin of  profit  which  the  competition  will  allow. 
In  many  instances  no  margin  of  profit  whatever 
is  figured  in  the  price,  the  export  commission 
house  relying  on  its  ability  to  purchase  from 


EXPORT  HOUSES 33 

the  manufacturer  at  a  lower  cost  than  that 
figured  in  its  quotation  or  offer,  or  in  normal 
times  it  may  reckon  on  the  possibility  of  gain- 
ing some  advantage  in  freight. 

The  advantage  to  the  foreign  importer  of 
buying  on  the  C.I.F.  basis  is  obvious.  In  buy- 
ing on  an  F.O.B.  basis,  he  is  unable  to  sell  his 
goods  before  they  are  received  and  until  he 
knows  exactly  what  the  insurance  and  freight 
amount  to ;  whereas  in  buying  on  a  C.I.F.  basis 
he  knows  exactly  what  his  goods  will  cost  him, 
can  approximate  his  duty  and  landing  charges, 
and  can  sell  the  goods  either  before  or  as  soon 
as  he  has  advices  of  their  being  shipped.  In 
the  case  of  certain  lines  in  which  competition 
is  keen,  it  would  be  practically  impossible  for 
a  merchant  abroad  to  buy  on  any  other  than  a 
C.I.F.  basis.  On  the  other  hand,  there  are  cer- 
tain goods  which  vary  in  measurement  or 
weight,  so  that  the  labor  involved  in  figuring 
C.I.F.  prices  as  well  as  the  risk  in  such  quota- 
tions would  make  it  impossible  to  quote  C.I.F. 
prices  economically  or  safely. 

Were  it  feasible,  the  importer  would  buy 
only  on  C.I.F.  terms.  But  it  is  difficult  for  a 
commission  house  to  quote  C.I.F.  terms  on 
specialties  as  it  does  on  staples,  for  the  commis- 
sion house  would  find  it  almost  impossible  to 
know  the  measurement  and  weight  of  some 
goods  before  they  were  packed.  It  is  easy  for  a 


34 FOREIGN  TRADE 

commission  house  to  quote  a  C.I.F.  price  on  a 
carload  of  wire  nails  because  it  knows  that  a 
keg  of  nails  will  weigh  so  much  and  measure 
so  much,  and  it  can  get  a  freight  rate  accord- 
ingly. When  it  comes  to  shipping  sundry 
shelf  hardware,  for  example,  the  weights  and 
measurements  could  never  be  determined  until 
the  quantities  ordered  were  packed. 

The   relations   of    the   export   commission 
house  with  the  American  manufacturer  are 
generally  not  so  close  as  its  relations  with  the 
foreign  importer,  for  the  reason 
Relattonsof  ^^^^    ^^^    export    commission 

Commission  House       ,  i  n    j 

with  Manufacturer  '^""^^  "^^y  be  called  upon  to 
purchase  from  a  manufacturer 
one  day  and  possibly  not  again  from  the  same 
man  for  years.  On  the  other  hand,  it  is  very 
likely  to  be  in  close  touch  for  years  with  the 
buyers  abroad.  The  services  which  are  per- 
formed, however,  are  as  useful  to  the  manufac- 
turer as  to  the  buyer  abroad.  In  the  first  place, 
the  average  manufacturer  engaging  in  a  gen- 
eral export  business  must  make  use  of  the 
export  commission  house  or  his  selling  expense 
will  eat  very  heavily  into  his  profits.  The  ex- 
port commission  house  makes  no  charge  to  the 
manufacturer  except  in  special  cases  noted 
later  in  this  Unit. 

By  using  the  export  commission  house  the 
manufacturer  is  able  to  ship  to  a  concern  in  his 


EXPORT  HOUSES 35 

own  country  rather  than  become  involved  in 
the  details  of  ocean  bills  of  lading  and  custom 
house  formalities ;  and,  what  is  most  appealing 
to  the  average  manufacturer,  he  receives  his 
cash  from  the  export  commission  house 
promptly  when  due  instead  of  being  obliged  to 
investigate  the  credit  of  possibly  thousands  of 
customers,  and  then  have  the  accounts  open  on 
his  books  for  many  months  or  until  informed 
by  his  bankers  that  his  draft  on  the  customer 
has  been  paid. 

The  manufacturer  often  expects  an  unrea- 
sonable amount  of  service  from  the  export  com- 
mission house.  If  the  export  commission  house 
performed  no  other  service  than  that  of  receiv- 
ing the  goods  from  the  manufacturer  and  pay- 
ing for  them,  its  work  would  be  a  distinct  com- 
mercial asset.  In  addition  to  this,  however,  it 
is  called  upon  for  so  much  additional  work, 
which  it  performs  for  the  manufacturer  freely 
and  gratuitously,  that  it  is  difficult  for  the 
writer  to  understand  how  any  manufacturer, 
except  one  or  two  of  the  largest,  can  afford  to 
ignore  the  export  commission  house.  Even  the 
Standard  Oil  Company  and  the  United  States 
Steel  Products  Company,  two  of  the  largest 
export  manufacturers  in  America,  still  sell 
their  products  in  certain  markets  through  the 
export  commission  house;  and  it  was  only 
when  their  business  grew  to  such  a  volume  as 


3b FOREIGN  TRADE 

to  make  it  advisable  for  them  to  do  so  that  they 
opened  their  own  branches.  A  large  percent- 
age of  the  business  of  the  United  States  Steel 
Products  Company  is  still  handled  through 
export  commission  houses  and  is  paid  for  by 
them  even  though  the  United  States  Steel 
Products  Company,  like  the  Standard  Oil 
Company,  has  agents  in  most  of  the  places 
where  the  export  commission  houses  are 
represented. 

The  export  commission  house  is  distinct 
from  the  export  merchant  in  that  the  commis- 
sion house  usually  acts  as  an  agent  buying  what 

it  is  instructed  to  or  else 
Comparison  withExPort     ^     ■        ^^^   g^^j        gj^^l_ 

Merchant  and  ^  ,  r-.  t  t-*    i_     • 

Manufacturer's  Agent        ta-ieously  on  a  C.I.F.  basis, 

whereas  the  export  mer- 
chant, so-called,  generally  buys  on  his  own  init- 
iative and  responsibility,carries  stocks  andsells 
at  prices  established  by  himself,  not  charging 
any  commission  but  fixing  his  own  margin  of 
profit  and  including  it  in  the  price.  As  com- 
pared with  England,  there  are  comparatively 
few  export  merchants  in  this  country,  and  the 
ones  who  are  here  generally  confine  their  ef- 
forts to  comparatively  few  markets,  whereas 
the  average  export  commission  house  is  gener- 
ally operating  throughout  the  world. 

The  export  commission  house  is  distinguished 
from  the  ordinary  manufacturer's   agent  in 


EXPORT  HOUSES 37 

that  the  former  is  presumed  to  buy  from  any 
manufacturer  designated  by  the  foreign  im- 
porter, or  when  selling  on  a  C.I.F.  basis  to  hold 
itself  free  to  buy  from  any  firm  that  best 
suits  its  convenience,  whereas  a  manufacturer's 
agent  is,  as  the  name  implies,  the  agent  of 
one  manufactuer  of  a  certain  line  and  rarely 
carries  a  competing  line.  The  orders  pro- 
cured by  the  manufacturer's  agent  resident  in 
this  country  or  traveling  abroad,  as  a  rule, 
reach  the  manufacturer  through  the  export 
commission  house.  There  is  little  distinction 
in  this  country  between  a  manufacturer's  agent 
and  a  manufacturer's  salesman,  except  that  it 
is  becoming  more  and  more  the  practise  with 
manufacturers  to  pay  their  agents  a  commis- 
sion on  the  results  obtained  instead  of  putting 
them  on  a  straight  salary  basis. 


11 

Organization,  Field  and  Methods 

HEADQUARTERS  for  the  majority  of 
American  commission  houses  are  lo- 
cated in  New  York.    They  are  for  the 
most   part   American    concerns   financed    by 
American  capital  and  employing  in  their  head 
offices    a   certain   number   of    foreigners    to 
handle  correspondence  where  some 

J^^^ .     .        language  other  than  English  is  re- 

Vrgamzatton  •!/->.  n       i 

quired.  Generally,  the  export  com- 
mission house  is  made  up  of  units,  a  minimum 
unit  consisting  of  a  buyer,  a  correspondent,  a 
shipping  clerk  a  billing  or  auditing  clerk,  an 
invoice  clerk  and  a  bookkeeper.  These  units 
are  of  course  amplified  as  the  volume  of 
business  increases. 

In  the  case  of  an  export  commission  house 
with  operations  in  several  countries,  a  buyer 
with  his  department  is  assigned  to  each  coun- 
try. The  buyer  keeps  in  touch  with  the  gen- 
eral market  conditions  in  that  country  and  en- 
deavors to  become  personally  acquainted  with 
the  foreign  buyers,  keeping  up  the  relationship 
by  occasional  trips  and  constant  correspond- 
ence. If  the  buyer  has  to  deal  with  a  Spanish- 
speaking  country,  he  must  be  able  to  cor- 
respond in  Spanish  as  well  as  in  English.    In 

38 


EXPORT  HOUSES 39 

addition  to  the  general  buyers,  there  are  in 
large  organizations  experts  who  handle  only 
certain  articles  requiring  more  technical 
knowledge  than  the  average  buyer  can  be  ex- 
pected to  possess.  For  instance,  many  large 
firms  have  their  own  dry-goods  experts,  some 
have  chemists,  some  engineers,  these  men  act- 
ing in  an  advisory  capacity  to  the  other 
buyers. 

In  those  centers  where  its  volume  of  business 
is  largest  the  American  commission  house  gen- 
erally maintains  branch  offices  under  its  own 
name.  In  cities  where  its  trade  is 
not  sufficiently  great  to  warrant  the  ^^^^^^^^""^^ 
maintenance  of  a  complete  staff,  it 
works  through  agents  who  trade  under  their 
own  name  as  agents  for  the  American  com- 
pany. The  branch  houses  are  of  course  under 
much  closer  supervision  of  the  home  office  than 
are  the  agents.  The  latter  are  generally 
brokers  doing  whatever  business  comes  their 
way,  but  are  not  so  aggressive  as  the  branch 
houses.  As  a  rule,  the  branch  houses  are  in 
charge  of  men  who  have  been  trained  in  the 
home  office,  and  who  make  frequent  trips  to 
the  home  office  in  order  to  keep  in  touch  with 
headquarters  and  with  business  in  this  coun- 
try. These  men  are  assisted  by  natives  of  the 
country  in  which  the  branch  is  located  and  in 
some  cases  the  native  may  be  the  head  of  the 


40 FOREIGN  TRADE 

branch  office.  Branch  houses  are  an  essential 
feature  of  a  large  export  business. 

There  are  numerous  commodities  on  which 
prices  are  constantly  fluctuating.    By  the  use 
of  complicated  codes  the  home  office  is  able 
to   keep   the   branch   office   advised   of   such 
changes  in  prices.    The  branch  office  in  turn 
distributes   this   information   either   by  tele- 
graph   or    by    mail    to    its    customers    and 
prospective  customers  throughout  the  country. 
The  average  commission  house  handles  all 
classes  of  merchandise  and  in  addition  it  fre- 
quently specializes  in  certain  goods.     Some 
commission    houses    have    for    years 
Sfiectahzmg      specialized  in   patent  medicines  and 
in  Products      J  ^u  u  •   i  •     j     • 

drugs;    others    have    specialized    in 

heavy  drugs  and  chemicals,  or  in  dry-goods, 
or  in  clothing,  or  in  foodstuffs,  or  in  machin- 
ery and  heavy  hardv^are.  Sometimes  a  com- 
mission house  will  specialize  in  some  one  class 
of  merchandise  in  one  territory  due  possibly 
to  the  fact  that  its  salesmen  in  that  territory  are 
particularly  capable  of  selling  that  line, 
whereas  in  other  markets  the  salesmen  may  be 
more  interested  in  other  articles.  There  is 
therefore  no  general  rule. 

There  is  the  distinct  advantage  in  specializ- 
ing that  a  buyer  will  always  prefer  to  do  busi- 
ness with  a  man  who  thoroughly  knows  his 
product.    By  specializing  also  the  commission 


EXPORT  HOUSES 41 

house  is  able  to  keep  in  much  closer  touch 
with  the  world  markets  for  the  commodity 
handled,  and  this  knowledge  is  one  of  the 
greatest  assets  an  export  commission  house  can 
have.  It  may  be  the  case,  however,  that  the 
volume  of  trade  in  a  particular  specialty  in 
certain  countries  may  not  warrant  its  being 
handled  by  a  specialist. 

Generally  a  commission  house  is  forced  to 
specialize  in  markets  and  concentrate  its  activ- 
ities in  a  limited  number  of  countries.    This  is 
brought   about  by  the   differing   re- 
quirements and  customs  of  different    ^J^^ctahztng 
importing  nations,  and  the  necessity 
for  having  sufficient  business  in  a  country  to 
enable  the  buyers,  shipping  clerks  and  invoice 
clerks  to  keep  in  touch  with  the  freight  situa- 
tion and  the  customs  of  the  country. 

Business  terms  and  expressions  do  not  neces- 
sarily mean  the  same  in  all  countries.  For  ex- 
ample, a  merchant  who  has  traded  for  years 
with  Australia  will  understand  the  expression 
C.I.F.  (cost,  insurance  and  freight)  to  have 
a  certain  fixed  meaning.  Should  he  not  have 
an  Argentine  department  but  decide  to  accept 
a  C.I.F.  order  from  Argentina,  it  would  be 
quite  natural  for  him  to  figure  his  price  on 
the  basis  used  in  Australian  trade.  Later  he 
would  find  that  in  Argentina  a  C.I.F.  price  is 
understood  to  include  bank  commission  and 


42 FOREIGN  TRADE 

interest — items  not  included  in  a  C.I.F.  price 
quoted  to  Australia.  If  a  merchant  in  Aus- 
tralia wishes  to  buy  at  a  price  which  includes 
bank  commission  and  interest,  he  will  ask  for 
a  price  "C.I.F.  and  exchange."  This  is  only 
one  small  illustration  of  the  variations  that 
exist  in  different  markets.  In  addition,  there 
are  different  consular  regulations  and  differ-, 
ent  requirements  of  the  customs.  All  of  these 
variations  must  be  thoroughly  understood  if 
business  is  to  be  satisfactorily  conducted. 

It  is  obvious,  therefore,  that  no  one  firm  can 
accept  business  at  random  from  all  over  the 
world.  It  must  seriously  cultivate  and  study 
particular  markets. 

Most  of  the  largest  American  export  com- 
mission houses  have  business  of  consequence 
in  only  a  very  limited  number  of  markets, 
although  practically  all  of  the  large  ones  have 
perhaps  four  or  five  auxiliary  markets  in  addi- 
tion to  their  main  field  of  operation.  The 
bulk  of  the  businss  is  in  the  remote  countries. 
Nearby  markets  such  as  Cuba,  Canada  and 
Newfoundland  are  usually  treated  by  Ameri- 
can manufacturers  as  domestic.  They  are  ex- 
ploited through  salesmen  by  the  same  methods 
that  are  employed  in  the  United  States. 
Farther  afield,  however — in  Argentina,  for 
example,  or  Australia — more  time  must  be 
consumed  by  an  individual  salesman  in  mak- 


AMERICAN  GOODS  IN  RHODESIA 

An  employee  of  the  South  African  agent  of  Bowring  &  Company 
demonstrating  American  products  at  a  local  open-air  fair 


EXPORT  HOUSES 43 

ing  the  trip  back  and  forth,  and  considerably 
more  expense  must  be  incurred.  The  volume 
of  business  resulting  from  such  a  trip  must  be 
correspondingly  greater  in  order  to  show  a 
profit.  Hence  it  is  often  cheaper  for  manu- 
facturers to  employ  export  commission  houses 
or  manufacturers'  agents  to  develop  their 
export  trade  in  such  distant  markets. 

Three  selling  methods  are  made  use  of  by 
the  commission  house.  They  are :  First,  the  em- 
ployment of  salesmen  sent  out  either  from  the 
home  office  or  from  the  branch 
houses;  second,  the  employment     Three  Methods  of 

'  J  J.  J  .  Getting  Sales 

of  correspondence  directed  from 

the  home  office;  and  third,  the  use  of  adver- 
tising. 

Strangely  enough,  although  this  country 
probably  leads  the  world  in  volume  and 
efficiency  of  advertising,  this  last  method  has 
been  employed  comparatively  little  by  the  ex- 
port commission  house.  It  is,  however,  being 
used  more  as  time  goes  on.  The  commission 
house  has  in  the  past  relied  upon  its  branch 
houses  and  salesmen  to  keep  its  name  before 
the  buyer.  Some  commission  houses  have 
published  house  organs  or  market  reviews  of 
their  own  to  assist  their  branch  houses,  but  the 
circulation  of  these  papers  is  limited  and  ad- 
vertising on  any  comprehensive  scale  has  not 
been  done. 


44 FOREIGN  TRADE 

The  second  method,  that  of  securing  busi- 
ness by  correspondence,  is  a  slow  method.  It 
is  likely  to  be  a  discouraging  one,  as  much  of 
the  effort  expended  falls  on  barren  ground. 
But  through  the  assistance  of  the  various 
American  organizations  for  the  promotion  of 
export  trade,  considerable  business  is  secured 
by  correspondence  in  answer  to  inquiries  of 
importers  abroad  who  often  write  to  some 
association  for  information  which  can  be  sup- 
plied by  a  commission  house  better  than  by 
any  one  else. 

The  method  which  employs  salesmen,  how- 
ever, is  that  most  universally  used,  and 
is  the  method  from  which  the  best  results 
are     secured.       The     salesman^    is 

Salesmen  the     ^j^der  the  immediate  supervision  of 
Best  Method        ,      ,  -    ,  ,       ^, 

the  branch  house  and  as  the  customs 

of  the  various  countries  differ  widely,  it 
becomes  necessary  for  a  salesman  to  make 
his  headquarters  in  one  country  and  stay 
there.  There  are  exceptions  to  this  rule; 
some  salesman  are  sufficiently  experienced 
in  foreign  requirements  to  be  able  to 
travel  from  one  country  to  another  and  accom- 
plish good  results.  The  salesman  of  an 
export  commission  house  does  not  carry  with 
him  very  large  lines  of  samples.  The  cost  of 
doing  this  is  considerable  and  he  therefore 
endeavors  to  show  samples  at  the  main  branch 


EXPORT  HOUSES 45 

office.  In  addition,  the  commission  house 
strives  to  sell  at  its  head  office  in  the  United 
States  by  keeping  in  touch  with  foreign  buyers 
as  they  arrive  from  abroad  and  acquainting 
them  with  the  proper  manufacturers. 

The  commission  house  generally  has  two 
things  to  sell — goods  and  services.  An  article 
may  be  sold  by  sample  or  by  catalog,  or  in 
the  case  of  such  staple  lines  as  wire  and  rails, 
merely  by  description.  In  addition  to  this, 
however,  the  commission  house  sells  services, 
and  the  salesmen  abroad  and  the  branch  office 
and  the  home  office  all  cooperate  to  secure  as 
much  of  the  F.O.B.  or  indent  business  as  they 
can.  In  other  words,  they  endeavor  to  secure 
what  they  call  "an  account." 

Most    commission    houses    have   compara- 
tively little  more  to  offer  a  large  buyer  abroad 
than  have  their  competitors.    That  is  to  say, 
no  one  commission  house  can  do  very 
much  better  than  any  other  in  the     How  Service 
way  of  freight  rates,  insurance  rates, 
exchange  rates,  etc.    If,  therefore,  a  commis- 
sion house  is  soliciting  an  account  and  en- 
deavoring to  secure  this  from  a  competitor, 
it  becomes  necessary  for  the  solicitor  to  con- 
vince the  buyer  that  the  service  to  be  rendered 
by  his  firm  will  be  more  satisfactory  than  that 
of  his  competitor.    For  example,  he  may  be 
able  to  show  that  his  shipping  clerk  is  able 


46 FOREIGN  TRADE 

to  get  goods  delivered  where  another  ship- 
ping clerk  cannot;  he  may  show  that  his  firm 
keeps  the  customer  better  informed  as  regards 
the  condition  of  his  orders;  he  may  show  how, 
in  a  thousand  and  one  ways,  his  house  keeps 
the  customer  satisfied  where  some  other  firm 
with  possibly  not  the  same  experience  would 
not  be  able  to  give  as  good  services — although 
in  such  items  as  rates  of  commission,  insurance, 
freight  rates,  they  may  all  be  on  a  par. 

The  rate  of  commission  charged  by  the  ex- 
port commission  house  is  from  2^  per  cent, 
to  5  per  cent.    There  are  exceptional  cases  in 
which  this  rule  does  not  hold,  but  in 

a  es  of  preneral    the    commission    varies    be- 

Commtsswn  in  rr.i  11 

tween  these  ngures.  1  he  rate  charged 

will  depend  on  the  size  of  the  customer's 
orders  and  the  amount  of  detail  work  they  re- 
quire. It  is  curiously  true  that  it  is  easier  for 
a  commission  house  to  do  business  with  large 
firms  than  with  small  ones,  even  though  the 
larger  business  is  at  a  lower  rate  of  commis- 
sion. The  work  done  by  the  commission  house 
is  practically  as  great  on  an  order  for  a  small 
package  as  it  would  be  on  an  order  for  a  car- 
load of  material.  It  requires  just  as  long  to 
fill  it,  just  as  long  to  ship  it  and  just  as  long  to 
invoice  it,  although  the  remuneration  is  less. 
As  in  most  other  businesses,  it  is  the  largest 
buyers  who  are  generally  the  cheapest  buyers. 


EXPORT  HOUSES 47 

The  question  has  often  been  asked  whether 
commission  houses  charge  varying  rates  of 
commission    to    one    customer    on    different 

classes  of  merchandise.    That  is 

.      .  J-  *•      4.-   ^     Staples  Seldom 

to  say  ,  is  there  any  distmction    ^  ^.^ 

,      '  .  ,  •  J     Bought  on 

made  between  specialties  and  Commission  Basis 
staples  as  regards  the  commis- 
sion charged?  The  answer  to  this  question 
is  that  the  staples  are  very  rarely  bought  on  an 
F.O.B.  commission  basis.  They  are  usually 
bought  on  a  C.I.F.  basis,  in  which  case,  of 
course,  no  commission  is  charged.  The  profit 
of  the  commission  house  is  included  in  the 
price. 

The  reason  for  this  is  very  simple.  A  staple 
line  is  sold  on  a  close  margin  of  profit.  All 
the  importers  abroad  handling  the  same  line 
of  staples  have  competition  to  meet  just  as  is 
the  case  with  merchants  in  this  country;  sell- 
ing prices  must  therefore  be  closely  figured. 
If  the  importers  bought  on  F.O.B.  and  com- 
mission terms,  they  would  not  know  what  their 
goods  were  to  cost  until  the  invoices  and  the 
freights  bills  arrived.  By  buying  on  C.I.F. 
terms  they  can  estimate  very  closely  what  the 
merchandise  will  cost  landed  in  the  ware- 
houses. If  the  importers  abroad  did  not  buy  on 
C.I.F.  terms,  they  would  never  be  able  to  sell 
ahead  but  only  from  actual  stocks  in  hand. 
Yet  the  foreign  importer,  through  the  sales- 


48 FOREIGN  TRADE 

man  traveling  for  him,  must  be  able  to  quote 
advance  prices  on  staples.  These  are  very 
often  handled  on  a  very  narrow  margin  of 
profit  so  as  to  induce  business  in  other  lines 
which  are  more  profitable. 

As  a  practical  matter,  the  average  profit 
figured  on  staples  is  a  lower  percentage  than 
the  commission  would  be  if  the  staples  were 
sold  on  an  F.O.B.  commission  basis.  It  does 
not  necessarily  follow,  however,  that  the  ex- 
porter makes  less  on  staples  than  on  specialties, 
for  in  the  export  business  as  in  all  business 
there  are  firms  that  choose  to  take  a  chance  on 
the  market.  They  will  often  sell  goods,  rely- 
ing upon  the  cost  going  down  before  they  have 
to  purchase  from  the  manufacturer;  and  in 
normal  times  these  traders  occasionally  go 
short  on  the  freight  as  well.  This  form  of  trans- 
action is  dangerous.  Firms  have  been  ruined  by 
speculation  of  this  character,  just  as  they  have 
by  speculation  in  stocks  or  other  properties. 
It  is  an  attractive  form  of  business  to  some 
people,  however,  as  it  enables  them  to  match 
their  knowledge  of  the  markets  of  the  world 
against  their  competitors'  knowledge. 

There  is  still  another  form  of  speculation. 
This  consists  in  the  exporter's  booking  large 
quantities  of  some  product,  for  which  he 
knows  he  has  a  market,  at  a  time  when  he  con- 
siders the  ruling  price  of  the  product  favor- 


EXPORT  HOUSES 49 

able.  There  are  certain  lines  produced  at  only 
one  season  of  the  year.  Exporters  will  fre- 
quently lay  in  stocks  of  these  and  rely  upon  a 
subsequent  rise  in  market  prices  to  net  them  a 
profit  on  resale. 

To  what  extent  a  commission  house  buys  in 
this  manner  or  sells  short,  cannot  be  learned 
by  an  outsider.  That  it  is  done,  is  easily 
proven.  The  fact  that  it  is  possible  at  times 
to  buy  goods  from  exporters  below  the  actual 
market  price  of  the  day,  plus  the  ruling  freight 
rate,  shows  very  clearly  that  the  exporter,  in 
order  to  do  this,  has  protected  himself  by 
earlier  purchases  and  freight  contracts. 

The  commission  house  buyer  is  generally 
expected  to  know  the  best  sources  of  supply 
for  practically  everything  made  in  America. 
He  is  the  most  successful  in 

buying  who  has  the  broadest     ^^^  ^^'  Commission 
/:  1 J       r    1  1   J  '-ru  House  Buys 

field   of    knowledge.      1  here 

are  many  ways  by  which  the  buyer  keeps  in 
touch  with  the  best  markets.  Manufacturers' 
salesmen  are  constantly  calling  at  his  office; 
he  has  access  to  numerous  trade  publications; 
frequent  catalogs  and  letters  from  manufac- 
turers supply  information;  he  has  trade  direc- 
tories and  he  has  the  service  of  the  various 
trade  associations. 

In  the  case  of  certain  lines,  such  as  some 
foodstuffs,  dry-goods,  paper,  the  buyer  may 


50 FOREIGN  TRADE 

ask  for  samples  to  be  submitted  with  market 
quotations  of  any  particular  lines.  Very  often 
a  certain  amount  of  discretion  is  given  him  by 
the  buyer  abroad  and  he  has  to  use  his  judg- 
ment as  to  where  to  purchase. 

The  average  order  received  by  a  commis- 
sion house  is  for  a  particular  article,  with  the 
manufacturer's  name  and  address  specified. 
But  sometimes  a  foreign  customer  will  hear  of 
or  see  an  article  and  being  unable  to  identify 
its  manufacturer  will  leave  that  task  to  the 
commission  house  buyer.  Frequently  the 
buyer  then  has  a  considerable  problem  in 
locating  the  source  of  the  article. 

The  method  of  buying  varies  with  the 
character  of  the  articles  to  be  purchased.  If 
the  indent  from  abroad  specifies  the  name  of 
the  manufacturer  and  does  not  leave  to  the 
judgment  of  the  buyer  the  question  of  where 
the  goods  are  to  be  purchased,  the  buyer  either 
sends  out  an  inquiry  to  the  manufacturer  in 
the  form  of  a  letter  asking  for  quotations  on 
the  articles-  in  question,  or  if  the  firm  is  one 
from  which  he  has  purchased  regularly,  and 
he  knows  that  its  prices  are  correct,  he  will 
send  the  order  direct  to  the  manufacturer 
without  specially  asking  for  quotations. 

If  the  importer  has  asked  the  buyer  to  use 
his  judgment,  and  the  order  is  for  some 
article  which  is  being  manufactured  equally 


EXPORT  HOUSES 51 

well  by  several  firms,  the  buyer  will  send  in- 
quiries to  the  leading  manufacturers  of  that 
article,  and  hold  up  the  order  pending  their 
quotations.     On   receipt  of  these 
quotations,   he   must   then  decide     t^^w  the  Buyer 
7  ,  ,  ,      .       ,  .       Compares  rrtces 

from  whom  to  purchase,  basmg  his 

judgment  on  the  price,  on  the  time  of  prom- 
ised delivery,  and  on  his  general  knowledge  as 
to  which  of  the  firms  is  the  most  reliable. 

Again,  the  order  may  be  for  a  certain  food- 
stuff, such  as  Alaska  salmon,  and  it  may  be 
necessary  that  the  buyer  see  actual  samples  of 
the  goods  before  deciding  where  to  place  the 
order.  In  this  case  the  firms  to  which  he 
writes  are  asked  to  submit  samples  with  their 
quotations. 

The  advantage,  to  a  foreign  importer, 
of  doing  business  through  a  commission 
house  can  readily  be  seen  here.  Any 
specific  branded  article,  to  be  sure,  might 
well  be  purchased  by  an  importer  abroad 
direct  from  the  American  manufacturer. 
However,  if  the  character  of  the  article 
requires  the  exercise  of  judgment  by  some 
one  in  this  country  to  insure  that  the  purchase 
is  made  at  the  best  terms  and  from  the  best 
firms,  the  commission  house  is  absolutely  es- 
sential to  the  foreign  importer  unless  the  im- 
porter maintains  his  own  American  office. 
That  the  export  commission  house  not  only 


52 FOREIGN  TRADE 

gives  good  service,  but  is  moderate  in  its 
charge,  is  evidenced  by  the  fact  that  compara- 
tively few  foreign  importers  maintain  their 
own  buying  offices  in  New  York. 

In  England  it  is  a  common  occurrence  for 
the  heads  of  Australian  and  South  African  im- 
porters to  be  domiciled  permanently  in  Lon- 
don where  they  maintain  a  buying  office. 
Frequently  the  money  financing  the  business 
of  those  importers  is  English  and  the  buying 
is  controlled  in  London.  The  actual  buyers  in 
South  Africa  or  Australia  may  indicate  to  the 
London  office  what  they  require,  but  the  final 
word  on  the  placing  of  the  orders  is  done  in 
London.  This  state  of  affairs  is  very  common 
in  South  African  business.  Although  the  same 
practise  exists  even  more  frequently  in  Aus- 
tralia, the  firms  there  have  some  authority  at 
the  local  office  and  do  not  send  for  their 
requirements  through  London. 

It  is  appropriate  to  remark  here  that  the 
average  buyer  for  an  American  commission 
house  is  a  straight,  clean-cut,  honest  buyer,  and 
has  the  reputation  for  straight  buying  to  such 
an  extent  that  it  is  almost  unheard  of  for  a 
manufacturer's  salesman  to  offer  a  bribe  to  a 
buyer.  A  salesman  may  endeavor  to  keep  in 
the  good  graces  of  a  buyer  by  showing  him 
ordinary  courtesies  in  the  form  of  entertain- 
ment, but  it  is  a  tribute  to  the  integrity  of  the 


EXPORT  HOUSES 53 

average  commission  house  buyer  that  the 
writer  in  his  experience  has  never  heard  of  an 
instance  in  which  a  bribe  has  been  offered  to 
or  accepted  by  a  commission  house  buyer. 

The  manufacturers  in  America  have  no  cus- 
tomary method  of  selling  their  goods  to  com- 
mission houses.  The  nearest  approach  to  a  cus- 
tom is  the  policy  of  allowing  a 
cash    discount  of   2   per   cent,     ^ow  Manufacturers 

,  ,      ,  .,,  .J      ...        Sell  to  Lommtsston 

when  the  bills  are  paid  within    ffQj..ge 

ten  days  from  the  date  of  the 
invoice.  In  general,  the  manufacturer  from 
whom  the  purchase  is  made  consigns  his 
goods  direct  to  the  commission  house,  send- 
ing the  railroad  bill  of  lading  and  invoice 
to  the  house  by  mail.  The  commission  house 
sees  that  the  bill  agrees  with  the  order, 
that  the  terms  and  prices  are  correct,  and 
then  forwards  a  check  to  the  manufac- 
turer. It  is  comparatively  rare  for  man- 
ufacturers to  draw  on  commission  houses. 
The  majority  of  the  export  commission  houses 
have  ample  capital  for  their  business  and  take 
advantage  of  a  cash  discount  when  manufac- 
turers allow  it.  In  fact,  it  is  necessary  that  a 
commission  house  have  sufficient  capital  to  be 
able  to  benefit  by  this  discount,  as  otherwise  it 
would  not  be  able  to  meet  competition.  Gen- 
erally, therefore,  manufacturers  will  receive 
their  money  before  the  commission  house  has 


54 FOREIGN  TRADE 

had  an  opportunity  to  ship  the  goods  abroad 
and  secure  its  money. 

The  customary  method  employed  by  the 

commission  house  in  financing  sales  is  by  draft 

on  the  customer.    This  draft  may  take  one  of 

several  forms.    It  may  be  drawn  on 

How  Sales  ^^^^  ^^^^  under  a  letter  of  credit, 

Are  tinancea  i  •  i      i      i       i    i        •         j   i!       ^i. 

which  the  bank  has  issued  for  the 

account  of  the  buyer;  it  may  be  a  sight  draft 
with  the  documents  attached;  it  may  be  a 
draft  at  30,  60  or  90  days  with  instructions  to 
the  bank  to  deliver  the  bills  of  lading,  etc.,  to 
the  buyer  on  his  acceptance  of  the  draft,  or  it 
may  be  a  draft  at  30,  60  or  90  days  with  in- 
structions to  the  bank  to  deliver  the  bills  of 
lading  and  other  negotiable  documents  to  the 
buyer  only  on  payment  of  the  draft.  All  of 
these  methods  are  daily  in  use  by  commission 
houses. 

In  some  countries  it  is  necessary  under  the 
laws  to  give  up  the  documents  to  the  buyer 
when  the  draft  is  accepted ;  in  other  countries 
the  documents  frequently  arrive  long  before 
the  goods,  and  the  documents-on-payment 
method  is  employed.  This  is  a  common  prac- 
tise, for  instance,  in  Australia.  The  mails 
will  arrive  in  three  to  four  weeks,  the 
goods  possibly  not  for  two  or  three  months; 
the  buyer  does  not  wish  to  pay  for  the 
goods    far    in    advance    of    their    arrival, 


EXPORT  HOUSES 55 

so  he  has  his  commission  house  in  New 
York  draw  at  90  days'  sight,  which  is 
roughly  equivalent  to  1 20  days'  date.  He  then 
accepts  the  draft  on  presentation  by  the  bank 
and  the  bank  retains  the  documents.  Should 
the  vessel  arrive  before  the  draft  becomes  due 
for  payment,  the  merchant  then  goes  to  the 
bank  and  pays  the  draft,  receiving  a  slight 
rebate  for  interest  for  the  unexpired  time. 

In  Argentina,  the  documents  arrive  on  the 
boat  carrying  the  goods,  and  as  it  is  necessary 
for  the  importer  to  lodge  the  bills  of  lading 
with  the  custom  house  within  eight  days  of  the 
arrival  of  the  steamer,  the  method  of  financing 
outlined  for  Australian  business  is  imprac- 
ticable. Drafts  must  be  drawn  at  sight  or  the 
commission  house  will  lose  possession  of  the 
documents  until  the  draft  is  paid.  Otherwise, 
the  commission  house  must  grant  the  buyer 
credit  and  allow  him  to  secure  the  documents 
from  the  bank  on  his  acceptance  of  the  draft. 
It  has  been  stated  for  many  years  that  one  of 
the  factors  which  helped  Germany  build  up 
her  enormous  export  trade  was  her  extension 
of  long  credits  to  foreign  customers.  That  she 
has  allowed  these  credits  is  unquestionably 
true.  That  it  has  been  exceedingly  bad  prac- 
tise is  equally  true.  The  net  result,  especially 
in  South  American  countries,  is  that  the  im- 
porter  overtrades    and    carries   entirely   too 


56 FOREIGN  TRADE 

heavy  stocks  for  the  capital  he  employs.  When 
bad  times  come,  the  importer  is  working  en- 
tirely on  borrowed  capital  and,  as  he  is  unable 
to  clear  his  stocks  and  pay  his  drafts,  a  failure 
results. 

The  New  York  commission  house,  as  a  rule, 
charges  interest  on  its  drafts  at  the  rate  of  6 
per  cent,  per  annum.    It  can  borrow  from  its 

bank  at  less  than  this.    In  a 
Terms  Usually  Granted  ^  ^^^^'        ^^^^_ 

by  Commtsston  Houses         .         ,  ^i       u      i 

tries,    however,    the   banks 

charge  12  per  cent,  per  annum,  and  even  more. 

It  is  easy  to  see  why  the  foreign  importer 

prefers   to   have    the   American   commission 

house  allow  him  the  longest  possible  credit. 

The  maximum   time   which   has   ever   been 

allowed  by  the  export  commission  house  in 

this  country  is  90  days.     This  means  that  a 

merchant,  if  a  draft  is  drawn  "documents  on 

acceptance,"  can  have  his  goods  two  or  three 

months  before  he  is  obliged  to  pay  for  them. 

When  a  merchant  is  selling  mostly  imported 

goods  rather  than  locally  made  merchandise, 

he  has  to  anticipate  his  requirements  months 

ahead,  and  there  is  a  very  large  element  of 

risk  in  estimating  his  requirements.    Take  a 

merchant  in  Australia  for  example — he  will 

have  to  draw  up  indents  for  goods  that  he  will 

not  be  able  to  sell  to  the  consumer  until  six  or 

eight  months  after  he  mails  his  order.   A  great 


EXPORT  HOUSES 57 

many  changes  in  local  conditions  can  happen 
in  the  meantime,  and  when  the  goods  arrive 
he  may  find  that  he  has  heavily  overbought. 
Were  he  buying  locally,  he  would  buy  merely 
such  quantities  as  he  needed  from  time  to  time 
and  would  not  have  to  commit  himself  months 
ahead.  In  importing  in  Australia  there  is 
also  the  uncertainty  as  to  when  the  goods  will 
arrive.  Even  in  normal  times  unless  goods  are 
carried  in  stock  by  a  manufacturer — and  this 
is  comparatively  rare  except  on  staple  lines — 
an  importer  can  never  figure  within  two  to 
three  months  when  his  goods  will  be  received. 
In  the  trade  between  the  United  States  and 
Australia  it  has  unfortunately  been  the  prac- 
tise of  the  steamship  companies,  with  some 
few  marked  exceptions,  to  operate  on  no  fixed 
schedule.  A  boat  will  go  on  the  berth  and 
stay  on  until  she  is  full.  Her  voyages  are  so 
long  that  it  does  not  pay  to  advertise  a  definite 
sailing  date  until  trade  has  been  built  up  to  a 
point  where  steamship  companies  know  that 
the  boat  can  be  filled  by  the  date  specified. 

Some  years  ago  one  steamship  line  did  issue 
a  time-table  for  sailings  between  New  York, 
Australia  and  New  Zealand,  and  it  kept  to  its 
schedule,  arriving  at  destination  generally 
within  a  day  or  so  of  the  advertised  time.  This 
was  a  tremendous  help  to  the  export  trade  as 
long    as    it    lasted,    but    unfortunately    the 


58 FOREIGN  TRADE 

schedule  was  abandoned  after  a  while  and 
boats  have  never  been  operated  there  on 
schedule  since. 

The  situation  in  Australian  trade  has  been 
explained  as  an  example  of  the  opportunity 
offered  the  commission  houses  to  assist  the  for- 
eign importer.  By  extending  credit  to  the 
foreign  merchant,  by  choosing  the  best  routes 
by  which  to  forward  the  goods,  and  in  general 
attending  to  the  importer's  interests  during 
the  long  period  that  must  elapse  between  the 
mailing  of  the  indent  and  the  receipt  of  the 
merchandise,  the  commission  house  performs 
an  indispensable  service  to  the  general  mer- 
chant in  the  remote  markets. 


Ill 


Routine  of  the  Export  Commission 
House 

LET  us  take  up  step  by  step  the  handling 
of  an  order  from  the  time  it  is  received 
from  abroad  until  the  goods  have  been 
shipped  and  paid  for.  We  shall  assume  that 
the  order  comes  from  a  wholesale  hardware 
merchant  in  Australia  and  is  an  indent  consist- 
ing of  several  pages  of  assorted  hardware 
lines.  In  some  instances  the  merchant  has  speci- 
fied the  maker  who  is  to  supply  the  goods.  On 
other  items  he  simply  specifies  the  goods  with- 
out naming  any  maker,  leaving  the  purchase 
entirely  to  the  judgment  of  the  buyer  in  New 
York.  In  some  instances  prices  may  be  speci- 
fied either  as  a  limit  or  as  a  guide  to  the  buyer. 

The  first  question  to  be  considered  on 
receipt  of  the  order  is :  How  does  the  importer 
propose  to  pay  for  the  goods  and  for  the 
freight  which  must  generally  be  prepaid  by 
the  commission  house?  It  is  therefore  neces- 
sary before  putting  the  order  into  effect  to 
have  an  approximate  idea  of  its  value  and  of 
the  credit  demanded. 

In  a  well-established  export  commission 
house  this  question  of  credit,  on  the  most  of  the 

59 


6o FOREIGN  TRADE 

orders  received  through  the  mails  from  its 
regular  customers,  is  a  simple  matter  to 
decide.  This  is  the  case  because  the  commis- 
sion house  often  deals  with  the  same  firm  year 
in  and  year  out,  and  it  does  not  need  to  give 
much  consideration  to  the  question  of  credit 
once  an  importer's  standing  is  established. 

If,  hov\^ever,  the  order  comes  from  a  firm 

that  is  not  well-knov^n  to  the  exporter,  and  that 

nevertheless  expects  credit,  then  the  exporter 

must  inform  himself  as  to  the  char- 

InhrmltioT  ^^*^^  ^^^  financial  responsibility  of 
the  importer.  Such  information  is 
obtainable  from  the  commercial  agencies,  and 
may  be  supplemented  by  information  from 
banks  and  perhaps  from  some  commercial  as- 
sociation or  trade  paper.  All  of  these  agencies 
nov^adays  maintain  elaborate  files  of  informa- 
tion on  foreign  firms. 

There  are  few  worthwhile  concerns  in  any 
portion  of  the  globe  today  regarding  which 
it  is  impossible  to  obtain  in  New  York  fairly 
accurate  information.  So  the  risk  in  giving 
credit  may  be  judged  with  fair  precision.  In 
deciding  whether  a  firm  is  justified  in  receiv- 
ing credit  the  buyer  does  not  look  merely  at 
the  capital  and  business  volume  of  the  im- 
porter. Bulk  does  not  mean  character.  Often- 
times it  is  much  safer  to  deal  with  a  man  of 
comparatively  small  capital  who  is  thoroughly 


EXPORT  HOUSES 6i 

in  touch  with  his  market,  knows  what  goods 
he  can  absorb  and  does  not  buy  beyond  his 
capacity  for  selling,  than  it  is  to  do  business 
with  large  firms  that  at  first  glance  may  seem 
very  strong,  but  as  a  matter  of  fact  are  more 
speculative  than  the  small  man,  and  that,  when 
they  do  fail,  fail  disastrously. 

It  is  also  a  curious  but  true  observation 
in  some  markets  that  the  larger  an  importer's 
business  grows,  the  more  likely  he  is  to  take 
advantage  of  technicalities  and  endeavor  to 
profit  by  sharp  practises.  The  question,  there- 
fore, in  deciding  about  credit  is  not  only  "Is 
this  man  a  merchant  whose  position  entitles 
him  to  credit  if  he  desires  it?"  but  also  ''Is  he 
a  man  who  realizes  that  there  are  two  parties 
to  every  transaction,  who  will  pay  his  drafts 
when  they  fall  due  and  not  take  unfair  advan- 
tage of  technicalities?" 

An  importer  not  only  can,  but  very  fre- 
quently does,  go  to  one  commission  house  to 
purchase  goods  and  when  his  limit  of  credit 
has  been  reached  there,  go  to  the  exporter's 
competitor  and  purchase  from  him.  The 
writer  has  known  of  many  cases  in  which  an 
importer  would  be  buying  from  five  or  six  ex- 
porters all  competing  with  one  another  for  his 
business,  and  all  of  them  being  used  by  the 
importer  abroad  to  increase  the  amounts  of  his 
imports,  with  consequent  overtrading. 


62 FOREIGN  TRADE 

There  has  never  been  any  system  of  ex- 
changing credit  information  among  the 
export  commission  houses,  such  as  exists  in  so 
many  trades  in  this  country.  Owing  to  the  con- 
stantly increasing  export  trade,  organized 
credit  information  of  this  sort  will  probably 
before  long  be  available. 

If  the  character  and  standing  of  the  im- 
porter is  such  that  his  credit  request  is  satisfac- 
tory to  the  exporter,  the  order  is  then  turned 
over   to    the   buyer   who   must 
The  Order  Turned    acknowledge  its  receipt,  and  see 
Uver  to  Buyer  .      .        .  .  . 

what  mstructions  are  given  on 

the  order  with  regard  to  shipping,  insuring, 
financing  and  other  details.  These  instructions 
are  transferred  from  the  original  order  to  a 
card-index  from  which  the  shipping  and 
finance  department  may  obtain  information 
when  the  goods  are  being  shipped  and  invoices 
are  being  made  out. 

The  next  step  is  to  select  the  manufacturers 
from  whom  the  goods  are  to  be  bought.  In 
many  cases  the  orders  specify  manufac- 
turers with  whom  the  exporter  has  been  doing 
business  regularly  and  from  whom  he  knows 
he  can  always  get  the  lowest  prices.  There 
will  be  other  items  on  the  order,  however, 
which  can  be  supplied  equally  well  by  several 
factories.  In  this  event  the  buyer  will  solicit 
quotations  so  that  he  may  take  advantage  of 


EXPORT  HOUSES  63 


the  market  fluctuations  for  his  client's  benefit. 

The  next  step  in  the  buyer's  work  is  to  have 
orders  to  the  manufacturers  written  on  the  ex- 
porter's order  blanks.  These  direct  order 
blanks  specify  instructions,  terms  and  condi- 
tions. For  the  items  on  which  he  requires 
prices  before  actually  placing  the  order,  the 
buyer  has  an  extra  carbon  copy  of  the  order 
written  on  a  special  blank.  This  is  used  as 
an  inquiry  for  prices. 

Another  carbon  copy  of  the  exporter's 
order  is  made  on  heavy  paper;  this  goes  to  the 
shipping  clerk  to  enable  him  to  follow  up  the 
order  with  the  manufacturer  and 
attend  to  its  shipment.  Blank  ^her^  the  Buyer 
spaces  are  provided  on  the  back 
of  the  shipping  ticket  in  which  the  shipping 
clerk  may  keep  his  records.  The  buyer  is  now 
practically  through  with  the  order,  provided 
the  foreign  importer  has  correctly  specified 
everything  and  the  buyer  has  not  made  any 
mistakes  in  prices  and  other  details.  Often, 
however,  importers  abroad  are  careless  in  the 
make-up  of  their  orders,  and  will  give  a 
wrong  description  of  an  article  or  perhaps 
omit  specification  of  the  size  or  the  quality 
desired.  Such  mistakes  necessitate  a  letter 
from  the  manufacturer  to  the  commission 
house.  It  is  here  that  the  buyer  must  use  his 
judgment  as  to  what  to  do.    Shall  he  refer  the 


64 FOREIGN  TRADE 

order  back  to  the  importer  abroad  for  fuller 
information  or  shall  he  decide  himself? 

Obviously  the  buyer's  first  move  when  con- 
fronted by  such  a  problem  is  to  search  the  rec- 
ords and  find  out  whether  the  importer  has 
ever  ordered  any  of  these  particular  goods 
before ;  if  he  has,  the  buyer  feels  safe  in  follow- 
ing this  earlier  order  as  a  precedent.  If  there 
is  no  record  of  a  similar  shipment  in  the  past, 
then  he  must  either  decide  the  question  him- 
self or  refer  the  order  back.  Here  is  where 
good  judgment  is  invaluable,  because  if  the 
order  is  referred  back  it  means  a  delay  of  sev- 
eral months  in  the  shipment.  Should  he 
venture  a  guess  as  to  what  to  send,  there  is  the 
possibility  of  the  wrong  goods  being  shipped; 
and  then  the  exporter  is  in  difficulty  with  his 
client.  The  ability  to  decide  correctly  may 
mean  keeping  or  losing  a  customer. 

As  soon  as  the  order  is  sent  to  the  manufac- 
turer, the  carbon  copy  of  it,  which  is  now  the 
shipping  ticket,  goes  to  the  shipping  clerk.  He 
must  ascertain  from  the  original 

l?.l^^''^f^f  ^      order  what  the  shipping  instruc- 
Shtpptng  Clerk  .  a       .u  j  ^  t 

tions  are.  Are  the  goods  to  go  for- 
ward in  the  usual  way,  which  is  generally  by 
the  cheapest  method,  or  are  they  to  be  sent  by 
express,  by  parcel  post  or  otherwise?  The 
shipping  clerk  must  keep  his  records  in  careful 
order    and    his    shipping    tickets    separated 


EXPORT  HOUSES 65 

according  to  the  country  of  destination  and 
according  to  the  method  of  shipment  to  be 
used. 

Cabled  orders,  which  are  nearly  always  for 
goods  that  are  urgently  required,  must  be  kept 
separate  from  regular  orders.  In  course  of 
time  a  steamer  will  begin  to  load,  and  the  ship- 
ping clerk  must  then  see  that  the  out-of-town 
manufacturers  are  instructed  to  ship  their 
goods  to  New  York  at  once,  and  that  the  in- 
town  manufacturers  are  instructed  to  deliver 
to  the  vessel.  Prior  to  this,  he  has  had  to  make 
an  engagement  with  the  steamship  company 
for  the  estimated  amount  of  freight  room 
required.  This  estimate  is  largely  a  matter  of 
guesswork,  but  experience  enables  the  ship- 
ping clerk  to  judge  fairly  accurately  how 
much  room  he  needs. 

This  freight  is  engaged  either  with  the 
steamship  company  direct  or,  as  in  many 
cases,  through  the  freight  broker — a  factor 
whose  business  it  is  to  keep  in  touch  with  the 
changes  in  freight  rates  and  the  opportunities 
for  shipping  to  various  points.  After  the  ship- 
ping instructions  have  been  out  a  few  days,  the 
clerk  must  begin  to  look  up  such  orders  as  are 
not  already  on  the  way  to  the  steamer,  find  out 
the  reason  for  the  delay,  and  see  if  he  cannot 
hurry  them  forward.  He  must  then  see  that 
the  various  items — possibly  from  one  to  50 — 


66 FOREIGN  TRADE 

going  to  the  same  importer  are  all  assembled 
at  the  dock,  receipts  for  them  issued  and  bills 
of  lading  subsequently  made  out  by  the  steam- 
ship company. 

Simultaneously  with   the   shipping  clerk's 
work,  the  bookkeeping  department  is  receiv- 
ing bills  from  the  manufacturers  for  the  goods 
shipped.     Arrangements  must  be 
The  Work  of  the     j^iade  to  pay  these  bills  at  such  a 
Bookkeeping  ■  .,,  .  ^    ^u 

n  J.    ^       ^  time  as  will  insure  to  the  exporter 

JtJePcivttnetit 

the  benefit  of  any  cash  discounts 

allowed  by  the  manufacturer. 

The  method  of  handling  these  payments 
differs  with  the  concern.  One  of  the  most  cer- 
tain methods  is  to  write  the  checks  as  soon  as 
the  bills  come  in  and  then  put  them  in  a  port- 
folio under  the  date  when  the  check  should 
be  sent.  Obviously  the  check  is  not  signed 
until  the  time  of  remittance. 

The  bookkeeping  department  must  see  that 
the  quantity  and  description  of  the  goods  on 
the  bill  agree  with  the  items  in  the  importer's 
order  and  that  the  prices  charged  are  in 
accordance  with  the  arrangements  made  with 
the  manufacturer.  It  is  its  province  to  detect 
any  errors  in  the  quantities,  price,  etc.,  and 
call  such  blunders  immediately  to  the  manu- 
facturer's attention  so  that  the  matter  may  be 
corrected  if  possible  before  the  goods  have 
actually  left  the  port. 


EXPORT  HOUSES 67 

When  the  steamer  is  eventually  loaded  and 
ready  to  sail,  the  invoicing  department  must 
begin  making  up  the  invoices.  As  the  ship- 
ping clerk  is  the  one  who  knows 
what  is  being  sent  on  the  steamer,  J^/;,;'^^^ 
he  generally  gives  written  instruc- 
tions to  the  invoice  department  with  a  rough 
copy  of  the  bill  of  lading.  At  the  same  time  a 
copy  of  these  instructions  goes  to  the  book- 
keeping department,  which  picks  out  from  its 
files  the  manufacturers'  bills  relating  to  this 
order.  These  bills  are  then  turned  over  to  the 
invoicing  department,  which  begins  to  make 
up  the  various  necessary  documents,  referring 
to  the  card-index  for  the  client's  instructions  as 
to  how  the  draft  is  to  be  drawn  and  the  details 
of  insurance  and  other  matters. 

There  is  no  set  rule  for  drawing  and  there 
is  no  set  rule  for  insurance.  Some  importers 
abroad  have  their  own  open  policies,  and  the 
exporter  in  New  York  merely  notifies  the  in- 
surance company  or  its  agent  that  he  is  mak- 
ing the  shipment  for  the  account  of  the  im- 
porter abroad ;  and  that  is  all  he  has  to  do  in 
the  matter.  In  other  cases,  the  importer  abroad 
wishes  the  exporter  in  New  York  to  attend  to 
the  insurance  for  him,  and  it  is  then  the  ex- 
porter's duty  to  see  that  the  proper  form  of 
insurance  is  taken  out.  The  insurance  varies 
with  the  commodity  shipped.    Certain  goods 


68 FOREIGN  TRADE 

must  be  insured  against  pilferage;  others  must 
be  insured  against  breakage;  others  must  be 
insured  with  average,  etc. 

I  have  necessarily  had  to  jump  from  one 
heading  to  another  because  I  am  endeavoring 
to  follow  the  course  that  one  shipment  pursues 
in  an  office.  The  minute  the  steamer  has 
ceased  taking  cargo  and  the  exporter  is  ready 
to  make  up  his  final  papers,  there  are  three  or 
four  operations  going  on  at  at  same  time. 

We  shall  assume  that  the  shipping  clerk  is 
ready  to  make  up  his  bills  of  lading  and  is 
about  to  give  the  necessary  instructions  regard- 
ing the  invoices  to  the  invoicing  department. 

His  first  step  is  to  see  that  he  has  received 

all  of  the  dock  receipts.    This  is  sometimes 

difficult  to  ascertain  without  consulting  the 

records  of  the  steamship  com- 
Whenthe  Shipment  ^^  ^^^^^  ^^^^^  ^^^y. 

Is  on  Board  .    ^  ,     ^  •  i   •  j  u 

receipts  are  lost  or  mislaid  be- 
tween the  dock  and  the  exporter's  office. 
When  the  shipping  clerk  is  sure  that  he  has  all 
the  necessary  receipts,  the  bills  of  lading  are 
made  out,  generally  with  several  extra  copies 
besides  those  to  be  signed.  As  a  rule,  the  bills 
of  lading  specify  the  exporter's  name  as  ship- 
per, consigned  to  order,  and  bear  on  their  face 
the  shipping  mark  with  a  rough  description  of 
the  various  items.  There  are,  as  a  rule,  only  two 
or  three  copies  of  the  bills  of  lading  signed  and 


EXPORT  HOUSES 69 

negotiable;  any  one  in  the  absence  of  the 
others  indicates  ownership  of  the  goods  cov- 
ered. Besides  these  negotiable  bills  of  lading, 
copies  must  be  made  for  the  files  of  the  steam- 
ship company,  for  the  captain  of  the  steamer  to 
include  with  his  papers,  for  the  consignee  to  be 
sent  by  first  mail  to  give  him  advance  notice  of 
the  shipment,  with  possibly  one  copy  for  the 
consul  and  another  to  be  retained  in  the  office 
of  the  exporter. 

While  making  out  the  bills  of  lading,  the 
shipping  clerk  must  also  draw  up  a  shipper's 
export  declaration  which  he  takes  to  the  cus- 
tom house  before  the  sailing  of  the  steamer — 
unless  the  exporter  has  provided  a  bond  for  the 
producing  of  the  declaration  within  a  stipu- 
lated time  after  the  sailing  of  the  steamer. 
When  the  declaration  has  been  sworn  to  at  the 
custom  house,  it  is  delivered  by  the  exporter  to 
the  steamship  company,  which  collects  the 
declarations  of  all  the  exporters  and  turns  them 
in  to  the  custom  house  with  its  own  manifest. 

The  shipping  clerk,  having  made  the 
proper  number  of  bills  of  lading,  sends  them 
to  the  steamship  company's  office,  together 
with  the  various  dock  receipts.  In  the  course 
of  time  the  negotiable  bills  of  lading  are  re- 
turned to  him,  signed  by  the  steamship  com- 
pany or  by  the  captain  of  the  steamer,  together 
With  a  bill  for  freight.    He  then  has  to  see  that 


TO FOREIGN  TRADE 

the  freight  rates  charged  are  correct,  also  that 
the  figuring  is  accurate,  and  that  payment  is 
promptly  made  to  the  steamship  company. 
This  ends  his  work  in  connection  with  that 
particular  shipment. 

While  this  work  has  been  in  progress,  the 
bookkeeping  department  has  been  collecting 
the  manufacturer's  bills  and  the  invoice  de- 
partment has  started  on  its  preliminary 
,      .         work  of  making  up  the  invoices.    An  in- 

ItlVOiCB  c3       1 

voice  is  very  similar  to  an  ordinary  do- 
mestic bill.  It  is  made  out  in  various  ways, 
but  for  purpose  of  illustration  we  shall  only 
instance  one  or  two.  When  goods  are  bought 
on  commission — and  this  is  the  form  of  ex- 
port in  which  we  are  more  particularly  deal- 
ing— it  is  customary  for  the  exporter  to  send 
with  his  own  invoice  a  copy  of  the  manufac- 
turer's bill  to  him ;  if  this  is  done  the  exporter's 
invoice  consists  of  very  little  more  than  a  tabu- 
lated statement  showing  the  shipping  marks, 
packages,  name  of  manufacturer  and  other 
details. 

These  are  totaled,  the  various  charges  for 
cartage,  freight,  insurance,  etc.,  are  added,  and 
the  exporter's  commission  charged  on  the  total. 
In  some  countries  where  it  is  not  the  practise 
of  the  exporter  to  send  out  the  manufacturer's 
original  bills,  the  entire  bill  of  the  manufac- 
turer is  copied  off  by  the  exporter  on  his 


EXPORT  HOUSES 71 

own  headings  and  the  charges  added  at  the 
end. 

When  the  invoice  is  fully  made  up,  the  in- 
voice department  then  has  to  attend  to  the  in- 
surance as  mentioned  before;  and  the  next 
work  in  connection  with  the  shipment  is  that 
of  the  finance  department.  The  question  of 
financing  is  a  large  one  and  will  be  treated 
more  fully  in  a  later  unit.  In  order,  how- 
ever, to  make  the  story  consecutive,  we 
shall  take  simply  one  method  of  financing  such 
as  is  commonly  used  by  export  commission 
houses  in  New  York  City,  particularly  those 
shipping  goods  to  Australia,  New  Zealand, 
South  Africa  and  South  America. 

You  must  keep  in  mind  the  fact  that  we  are 
dealing  now  with  a  class  of  business  which  has 
already  been  referred  to  as  the  F.O.B.  busi- 
ness, in  which  the  exporter  is 

acting  as  the  agent  for  the  im-    ^^«««"«^^-  0.  B, 

^         ,         J  J    ,       •  Business 

porter  abroad,   and  huymg  on 

commission.  We  are  assuming  that  each  im- 
porter has  from  one  to  30  or  40  items  on  his  in- 
voice. The  exporter  has  been  paying  for  the 
goods  as  they  were  shipped  but  he  is  unable 
to  get  reimbursement  until  the  shipment  is 
completed,  the  bills  of  lading  made  up  and 
signed,  and  the  other  documents  properly 
drawn. 
The  invoice  clerk  now  refers  to  his  card 


72 FOREIGN  TRADE 

index  again,  to  ascertain  the  terms  which 
have  been  agreed  upon  for  reimbursement. 
Then  he  prepares  the  draft.  Usually  the  ex- 
porter makes  out  a  draft  on  the  importer  in 
duplicate.  This  draft  is  attached  to  the  bills 
of  lading,  invoices  and  insurance  certificate, 
and  is  sold  like  any  other  merchandise  to  some 
bank.  As  a  rule,  the  best  prices  for  foreign 
exchange  can  be  obtained  on  mail  days — that 
is,  on  the  days  when  there  is  an  English  mail — 
because  in  spite  of  the  fact  that  we  are  a  large 
manufacturing  and  exporting  nation,  the 
pound  sterling  is  still  the  basis  of  foreign  ex- 
change, and  drafts,  as  a  rule,  particularly  on 
English  colonies  and  on  a  great  many  other 
places  as  well,  are  drawn  in  sterling. 

Depending  on  the  necessities  of  the  banks, 
some  will  bid  higher  for  this  exchange  than 
others.  This  method  of  financing  is  of  course 
an  expensive  one.  Profits  have  to  be  made  by 
the  bank  in  New  York,  the  bank  in  London 
and  the  bank  at  destination.  Some  day  we 
may  be  able  to  draw  our  drafts  on  Australia 
and  South  Africa  in  dollars  and  save  at  least 
one  out  of  these  three  items  of  expense. 
Already  a  beginning  is  being  made  in  this 
direction  in  South  America  and  in  some  of  the 
American  colonies. 

The  draft  itself  generally  bears  on  the  back 
the  indorsement  of  the  shipper  or  drawer  of 


EXPORT  HOUSES 73 

the  draft.  Then,  in  case  it  is  not  paid  at  desti- 
nation, the  bank  will  come  back  to  the  exporter 
for  the  money  which  the  bank  advanced 
against  the  draft  when  it  was  discounted.  In 
some  markets  it  is  customary  for  the  importer 
to  arrange  with  his  own  bank  to  request  a  bank 
in  New  York  to  accept  the  shipper's  drafts  on 
him;  but  as  a  rule  a  house  of  good  standing 
with  sufficient  capital  can  sell  its  exchange,  its 
own  credit  being  more  important  than  the 
standing  and  credit  of  the  drawee.  After  the 
draft  has  been  sold  to  the  bank,  the  exporter 
still  has  considerable  bookkeeping  work  to  do 
in  seeing  that  he  is  not  paying  for  goods  which 
have  not  been  invoiced,  etc. 

When  finally  the  shipment  has  been  made 
and  the  steamer  has  sailed,  the  buyer  renders 
a  report  to  the  importer  as  to  the  standing  of 
the  orders  on  the  exporter's  books.  There  will 
be  numerous  advices  to  send  regarding  the 
goods  shipped,  and  explaining  why  other 
goods  have  not  gone  forward.  As  a  rule,  the 
exporter  at  the  same  time  sends  a  copy  of  the 
invoice  to  the  importer  together  with  a  copy  of 
the  bill  of  lading;  this  insures  that  in  case  the 
other  documents  which  have  been  sent  through 
the  bank  are  held  up  or  delayed,  the  importer 
will  be  advised  of  what  is  coming. 

Th  foregoing  deals  mainly  with  the  ordi- 
nary F.O.B.  or  commission  transactions.     A 


74  FOREIGN  TRADE 

C.I.F.  business  is  handled  in  much  the  same 
way,  except  that  the  exporter  does  not  send 
out  the  manufacturer's  bills.     He  merely  in- 
voices the  goods  to  the  customer 
Financing  C.  I.  F.     ^^  ^^^     .    ^^  himself  were  the 
tSustncss 

manufacturer.      When    a    sale 

is  made  C.I.F.  to  a  firm  in  Australia,  the  buyer 
has  to  pay  the  bank's  exchange  or  commission 
as  in  an  ordinary  F.O.B.  transaction,  but  very 
often  the  price  quoted  includes  this  exchange. 
In  that  event  it  is  designated  as  a  C.I.F.  &  E. 
or  C.I.F.  &  exchange  transaction. 

In  certain  countries  it  is  not  customary  for 
a  bank  to  demand  of  the  drawee  a  higher 
amount  than  the  face  value  of  the  draft.  In 
other  words,  the  bank  does  not  add  the  ex- 
change and  stamps  to  the  draft,  and  the  con- 
signee is  obliged  to  pay  only  the  amount  speci- 
fied in  the  draft.  In  such  a  market,  a  C.I.F. 
price  automatically  becomes  a  C.I.F.  &  E. 
price  because  the  bank  in  discounting  or  buy- 
ing the  draft  from  the  exporter  will  not  pay 
the  exporter  the  face  value  but  will  deduct  its 
own  commission  or  exchange  as  well  as  that 
of  the  bank  at  destination. 

These  and  various  other  details  are  learned 
only  from  experience,  and  generally  this  ex- 
perience is  costly.  There  is  probably  no  busi- 
ness which  has  more  pitfalls  and  in  which 
more  errors  can  be  made  than  in  the  business 


EXPORT   HOUSES 75 

of  the  export  commission  house.  The  exporter 
is  dealing  in  foreign  languages,  and  mistakes 
maybe  made  in  translations;  and  he  is  dealing 
with  representatives  of  various  nationalities, 
each  of  whose  pecularities  have  to  be  consid- 
ered and  understood  in  order  that  inquiries 
and  orders  may  be  handled  intelligently  and 
tactfully. 


IV 

Manufacturers'  Agencies 

THE  manufacturer's  export  agent,  strictly 
speaking,  confines  his  efforts  to  the  ex- 
ploitation— either    here    or    abroad,    or 
perhaps  both  at  home  and  abroad — of  goods 
made  by  the  manufacturer  or  manufacturers 
for  whom  he  is  acting  as  exclusive  representa- 
tive in  a  specified  territory. 
Three  Types  of  ^j^^   manufacturer's    export 

Manufacturer  s  Agents  ,        .  ,  .     , . 

agent  may  be  either  an  mdi- 

vidual  or  a  firm.  Years  ago  there  were  in 
New  York  hundreds  of  agents,  each  repre- 
senting a  different  group  of  manufacturers, 
who  procured  business  for  their  clients  by 
calling  on  the  various  commission  houses  and 
other  exporters,  leaving  catalogs  and  in  some 
cases  inducing  the  exporters  to  mail  these 
catalogs  to  their  customers  overseas.  In  ad- 
dition the  agent  himself  sent  catalogs  and  let- 
ters abroad  and  endeavored,  so  far  as  he  could, 
to  exploit  the  manufacturer's  product  direct. 

Later  there  developed  a  second  type  of 
agent — the  representative  who  permanently 
resided  in  a  foreign  country  and  sought  busi- 
ness direct  from  the  foreign  customers.  This 
type  of  agent  devoted  his  time  principally  to 

76 


EXPORT  HOUSES 77 

selling,  giving  no  attention  to  the  many  details 
of  financing  and  shipping  which  had  to  be 
taken  care  of  at  seaboard  in  the  United  States. 

The  third  type  of  agent  combines  the  func- 
tions of  the  other  two.  This  combination  type 
frequently  assumes  such  size  that  the  busi- 
ness is  organized  as  a  firm  or  company. 
Such  an  agency  includes  representatives  in 
this  country  who  attend  to  the  sale  of  the  goods 
to  the  export  houses,  or,  in  case  of  direct  ship- 
ment, to  the  many  details  at  seaboard  such  as 
shipping  and  financing,  and  representatives 
abroad  who  see  to  the  selling  in  foreign 
markets,  and,  at  times,  to  the  receipt  and 
delivery  of  goods. 

These  three  forms  of  manufacturer's  agents 
exist  in  large  numbers  and  are  constantly 
increasing.  Generally  the  manufacturer's 
agent  of  the  first  two  types  is  interested  solely 
in  selling  the  manufacturer's  goods  without 
regard  to  the  method  by  which  the  buyer  pro- 
cures the  goods.  For  instance,  the  manufac- 
turer's agent  calling  on  an  importer  in 
Australia  and  selling  padlocks  is  interested  in 
seeing  that  his  manufacturer's  brand  of  pad- 
lock is  carried  in  stock.  The  particular 
commission  merchant  or  importer  through 
whom  the  buyer  sends  the  order  does  not  in- 
terest him.  This  type  of  agent  generally 
works  on  a  salary  and  commission,  and  very 


78 FOREIGN  TRADE 

frequently  on  a  straight  commission  on  the 
business  coming  from  his  market. 

The  third  type  of  manufacturer's  agent  will 
often  attend  to  both  the  taking  and  the  ship- 
ping of  the  order.  Through  its  representative 
abroad  it  is  constantly  reaching  the  foreign 
customers,  and  securing  their  orders,  which  are 
then  forwarded  to  the  home  office  in  this  coun- 
try. The  home  office  sends  the  order  to  the 
manufacturer  by  whom  it  is  filled  and  for- 
warded to  seaboard.  The  manufacturer's 
agent  of  large  capital  and  big-scale  operations 
will  attend  to  the  foreign  shipping  and  the 
financing,  remitting  the  manufacturer  pay- 
ment for  the  order  in  accordance  with  domes- 
tic terms.  The  line  of  demarcation  between 
the  manufacturer's  agent  of  this  type  and  the 
commission  house  which  has  taken  on  the 
agencies  of  many  manufacturers  is  difficult  to 
draw. 

The  extent  to  which  the  export  commission 
house  acts  as  a  manufacturer's  agent  is  in- 
creasing year  by  year.  In  cases  where  the  com- 
mission house  acts  in  this  capac- 
How  the  j^  j^  jg  Q^  course  not  good  ethics 

Acts  as  Agent  ^^^  ^^e  house  to  charge  the  for- 

eign purchaser  a  buying  com- 
mission— unless  with  the  express  understand- 
ing and  agreement  on  the  part  of  the  buyer 
that  the  commission  house  be  privileged  to 


EXPORT  HOUSES 70 

charge  such  a  buying  commission  in  addition 
to  the  remuneration  received  from  the  manu- 
facturer for  selling  his  goods. 

The  true  status  of  the  commission  house  in 
such  a  case  must  be  thoroughly  appreciated  in 
order  to  avoid  misunderstanding.  There  is  a 
distinction  between  ( i )  a  commission  house 
that  acts  as  the  recognized  agent  for  certain 
manufacturers'  goods  and  receives  a  commis- 
sion for  exploiting  them,  and  (2)  one  that 
demands  a  buying  commission  from  a  man- 
ufacturer in  instances  where  the  house  has  con- 
tributed nothing  to  the  selling  of  the  product 
but  is  acting  merely  as  the  agent  of  the  pur- 
chaser abroad  who  is  paying  it  a  commission 
for  the  service.  In  the  first  case  the  commis- 
sion house  is  performing  a  distinct  service  for 
the  manufacturer,  and  is  entitled  to  be  paid 
on  the  same  basis  as  any  firm  intrusted  with 
the  exploitation  of  the  goods.  Its  remuneration 
from  the  manufacturer  in  this  case  is  perfectly 
legitimate;  its  service  is  quite  distinct  from 
commission  selling.  In  the  second  case,  where 
the  commission  house  has  no  agreement  with 
the  manufacturer  for  the  exploitation  of  his 
goods,  it  obviously  has  no  right  to  demand 
from  him  any  remuneration  for  the  sale  of  his 
goods.  In  that  case,  it  is  entitled  to  receive  its 
commission  solely  from  the  purchaser  abroad, 
who  has  engaged  it  to  make  the  purchase. 


8o FOREIGN  TRADE 

In    those   markets   where   the    commission 
'house  wields  a  very  strong  influence  it  is  nat- 
urally in  a  good  position  to  represent  manu- 
facturers.    In  such  localities  it 
Advantages  of  the      ^^^  ^^^^  ^^^  manufacturers  the 
Lommtsston  House  .       ,  .  ^  .  , 

in  Agency  Work  ^'^'""^^  services  of  its  salesmen 
who  are  thoroughly  acquainted 
with  the  markets  and  the  buyers.  When  the 
manufacturer  sends  his  own  salesmen  into  a 
new  territory,  they  are  obliged  to  devote  a 
great  deal  of  time  to  learning  which  markets 
are  best  and  who  the  principal  dealers  are. 
Even  after  they  have  gained  this  knowledge, 
the  traveling  salesmen  will  not  enjoy  the 
trade's  confidence  to  the  same  degree  as  the 
export  commission  house  agent,  who  is 
permanently  located  in  the  market.  Neither 
can  they  keep  continually  in  touch  with  local 
conditions  and  changes,  which  often  open  to 
the  commission  house  representative  excellent 
opportunities  for  closing  large  orders.  The 
manufacturer's  salesman  has  usually  but  one 
opportunity  a  year  to  exploit  personally  the 
sale  of  his  product;  the  commission  house 
salesman  can  find  such  opportunities  every 
day  in  the  year. 

It  is  a  question  whether  a  commission  house 
deriving  the  larger  part  of  its  business  from 
the  manufacturers'  agencies  which  it  controls 
should  be  considered  a  manufacturers'  agent. 


EXPORT  HOUSES 


Because  of  of  the  rapid  development  of  this 
form  of  export  activity  some  commission 
houses  now  devote  the  greater  part  of  their 
time  to  pushing  the  products  of  manufac- 
turers, and  not  in  purchasing  products  for 
foreign  importers.  It  is  this  development  that 
makes  difficult  the  clear  differentiation  be- 
tween the  manufacturer's  agent  and  the  type 
of  commission  house  representing  the  manu- 
facturer. In  New  York  City  the  term  manu- 
facturer's agent  still  applies  to  the  representa- 
tive who  does  no  commission  business,  who,  as 
a  rule,  rarely  attempts  to  ship  or  finance  the 
orders  he  receives  from  the  manufacturers. 
His  distinctive  function  is  confined  prin- 
cipally to  calling  on  commission  houses 
and  other  exporters  and  keeping  the  names 
of  his  principals  before  the  buyers  for 
overseas  markets.  Frequently  much  more  ex- 
tensive exploiting  than  this  is  carried  on  by 
organizations  which  still  are  known  as  "com- 
mission houses."  The  employment  of  the 
commission  house  as  an  exclusive  representa- 
tive for  the  purpose  of  getting  momentum  be- 
hind the  selling  of  a  manufacturer's  products 
abroad  is  a  practise  that  is  gaining  favor  as 
the  results  of  such  tactics  demonstrate  their 
efficiency. 

In  the  writer's  opinion  the  prospects  for  the 
future  of  the  export  commission  house,  both 


82 FOREIGN  TRADE 

in  its  commission  business  and  its  agency  busi- 
ness, have  never  been  so  promising  as  they  are 
today.    American  manufacturers  are  realizing 
what  world-wide   trade  would 
The  Future  ^^^^  ^^  \htm,  and  the  future  is 

'commiTon  House  "^^  ^'^^^^  ^^  ^^  characterized  by 
such  spasmodic  eflforts  at  gain- 
ing foreign  trade  as  have  marked  the  activity 
of  manufacturers  in  the  past.  In  the  develop- 
ment and  maintenance  of  this  business,  the 
export  commission  house  will  find  a  wider 
field  of  service  in  cooperating  with  those  man- 
ufacturers who  are  seeking  a  permanent  trade 
overseas. 

Furthermore,  importers  abroad  who  have 
never  before  bought  American  lines  have 
been  forced  here  by  the  war  and  are  becoming 
acquainted  with  the  superiority  of  American 
goods.  It  is  safe  to  assume  that  many  of  them 
will  continue  to  trade  in  this  market.  The 
commission  house  has  always  handled  the  bulk 
of  this  trade,  and  it  is  certain  that  the  larger 
part  of  the  new  business  will  go  through  the 
hands  of  the  commission  house. 

As  has  been  pointed  out  in  the  foregoing 
chapters,  the  advantages  of  dealing  through 
the  commission  house  are  many,  especially  for 
the  smaller  manufacturers.  In  the  very  nature 
of  things  the  business  is  bound  to  continue  and 
will  never  be  eliminated.     Many  instances 


EXPORT  HOUSES 83 

might  be  cited  to  prove  this.  The  writer 
knows  of  many  cases  in  which  a  commission 
house  that  is  handling  a  manufacturer's  busi- 
ness will  receive  from  him  25  to 

SO  invoices   a  month   for  goods     Z^^  Commission 
.  ,  1  r  Houses  Cannot  ne 

going  to  an  equal  number  of  cus-     Eliminated 

tomers  in  one  country.  But  each 
customer  will  probably  be  purchasing  many 
other  articles  from  other  firms.  All  of  these 
purchases  the  commission  house  will  attend  to, 
combining  the  shipments  and  looking  after 
all  of  the  details.  All  trade  cannot  be  big 
trade,  and  the  individual  manufacturer  cannot 
possibly  attend  to  all  of  these  shipments  to 
the  separate  customers  abroad  without 
incurring  enormous  incidental  expenses — 
expenses  which  will  add  to  the  cost  of  the 
article  and  permit  his  competitors  to  capture 
the  trade  by  dealing  through  the  commission 
house. 

The  question  of  building  up  a  trade  and 
that  of  handling  the  trade  after  it  has  been 
established  are  two  entirely  separate  prob- 
lems. The  writer  has  always  encouraged 
manufacturers  to  solicit  trade  from  the  cus- 
tomer in  every  way  possible,  such  as  by  export 
salesmen,  advertising,  correspondence  and 
other  methods.  When,  however,  it  is  a  ques- 
tion of  handling  the  trade  thus  created,  the 
writer  believes  that  the  commission  house  is 


84 FOREIGN  TRADE 

in  a  strong  position  to  conduct  the  business  for 
the  manufacturer  to  the  manufacturer's 
benefit. 

The  advantages  of  dealing  through  a  com- 
mission house  apply  with  equal  force  to  the 
importer  abroad  and  the  manufacturer  in  the 
United  States.  To  be  sure  there  are  some  ex- 
ceptions, but  so  long  as  there  are  general  mer- 
chants abroad  importing  general  merchandise 
from  the  United  States,  so  long  must  the  com- 
mission house  remain  in  business.  In  course 
of  time,  as  America's  export  trade  increases, 
an  increasingly  greater  number  of  large  for- 
eign importers  will  doubtless  maintain  their 
own  establishments  in  New  York,  to  do  for 
them  the  work  that  the  commission  house  is 
now  doing.  However,  this  can  come  only 
when  the  importer's  business  is  of  such  volume 
that  it  is  cheaper  for  him  to  maintain  his  own 
office  than  to'  pay  the  commission  house. 
There  will  always  be  small  merchants  abroad, 
the  more  so  as  world  trade  expands,  and  there 
Will  always  be  a  field  for  the  export  commis- 
sion house. 


Part  III 

The  export  forwarder 


The  Forwarder's  Services  at  Seaboard 

OF  the  many  problems  confronting  the 
manufacturer  embarking  on  export 
trade,  none  assumes  more  formidable 
proportions  than  that  of  sending  his  goods  cor- 
rectly and  safely  to  his  customer  overseas — a 
customer  usually  thousands  of  miles  away 
w^hose  practises  and  business  methods  the  man- 
ufacturer does  not  know.  In  the  early  days, 
when  practically  all  export  traders  were 
located  at  the  seaports,  the  manufacturer  and 
the  master  of  the  vessel  often  arranged  per- 
sonally for  the  transportation  of  cargoes.  The 
details  of  ocean  shipping  and  government  re- 
quirements were  few  and  simple.  The  manu- 
facturer mastered  his  forwarding  problem 
then  with  comparatively  little  difficulty. 

With  the  growth  and  expansion  of  trade, 
however,  and  with  the  multiplication  of  trans- 
portation facilities  and  the  increase  in  customs 
requirements,  the  problem  soon  became  a 
serious  burden  to  the  exporter.  This  was  es- 
pecially true  of  the  manufacturer  located  in 
some  inland  town  far  from  the  sea.  At  this 
point  in  our  commercial  development  the  for- 
eign forwarder  arose  and  constituted  himself, 
as  it  were,  the  manufacturer's  foreign  ship- 

87 


FOREIGN  TRADE 


ping  department.  To  be  sure,  in  the  great 
seaboard  cities,  where  shipping,  custom  and 
consular  offices  are  within  immediate  reach, 
all  large  exporters  as  a  rule  attend  to  their 
own  shipping,  employing  men  well-versed 
in  traffic  conditions.  Firms  located  some  dis- 
tance from  the  seaport,  however,  are  still 
dependent  in  a  large  measure  on  agents  or 
other  representatives  to  protect  their  interests, 
and  to  act  for  them  in  clearing  and  forward- 
ing their  commodities. 

A  good  export  representative,  knowing  his 
work  thoroughly  and  dealing  honestly 
with  his  customers,  is  as  valuable  in  guiding 
and  protecting  the  distribution  of  a  manufac- 
turer's products  as  a  salesman  is  in  marketing 
them. 

In  order  to  point  out  more  clearly  the  dif- 
ficulties a  merchant  or  manufacturer  may  en- 
counter in  the  handling  of  his  first  export 
orders,    and    to    demonstrate 
The  Manufacturer's       ^^^^  f ^jj    ^^^^  assistance  the 
torwardtng  Froblem       ,  ,  ,  ,  . 

forwarder     renders     to     his 

client,  let  us  consider  a  concrete  example. 

An  automobile  house  in  Cuba,  let  us  say, 
learns  that  rubber  tires  can  be  purchased  in 
Cleveland  at  first  cost,  and,  expecting  consid- 
erable business  to  result  if  the  tires  are  satis- 
factory, writes  the  Cleveland  merchant  for  his 
prices    C.I.F.    Havana.      Immediately   diffi- 


EXPORT  HOUSES 89 

culties  arise.  What  is  the  best  way  of  ship- 
ping? What  rates  of  freight  should  be  paid? 
What  consular  requirements  are  necessary? 
How  can  the  merchandise  best  be  shipped  so 
that  it  reaches  the  Cuban  merchant  in  a  satis- 
factory condition?  If  the  merchant  applies 
to  the  railroad  agent  in  his  city,  information 
would  no  doubt  cover  the  railage  to  seaboard 
but  not  beyond.  If  he  writes  to  a  steamship 
company,  he  may  ascertain  that  it  will  be  glad 
to  accept  his  shipment  provided  he  delivers 
the  freight  at  the  pier  on  a  certain  day,  ac- 
companied by  necessary  bills  of  lading  and  a 
check  for  the  charges  incurred.  The  diffi- 
culties of  doing  business  with  the  railroad  or 
steamship  lines  are  often  further  increased  be- 
cause each  individual  line  is  interested  only 
in  its  own  outlet  or  route ;  while  the  steamship 
company  may  be  willing  and  anxious  for 
Havana  business,  it  would  not  care  to  accept 
merchandise  for  Porto  Rico  or  Brazil. 

At  this  step  the  forwarder  appears,  and  says 
to  the  merchant  and  his  client:     "Send  your 
freight  to  me,  tell  me  your  wishes  and  I  will 
see  that  your  interests  are  pro- 
tected    here    and    abroad    by     How  Forwarder 

.  ,  -  Assists  Manufacturer 

routmg    the    goods    as    they 

should  be  sent,  by  taking  out  proper  docu- 
ments, by  conforming  to  the  laws  and  condi- 
tions of  the  importing  countries  and  by  obtain- 


90 FOREIGN  TRADE 

ing  for  you  every  advantage  which  you 
yourself  would  enjoy  if  you  were  at  the  point 
of  shipment." 

The  work  which  the  forwarder  thus  under- 
takes to  perform  covers  a  vast  and  diversified 
field  of  operations.  It  embraces  not  only  all 
of  the  steps  through  which  an  order  must  pass 
from  factory  to  shipboard,  but  also  many  of 
the  operations  in  foreign  lands. 

Let  us  follow  the  shipment  from  the  ship- 
ping platform  at  the  factory  until  it  reaches 
the  hold  of  the  ocean-going  vessel.  A  clear 
presentation   of    the    problem 

Shimngto  confronting  the  forwarder  will 

Seaboard  by  Rati  ,  ,  ,     ^ 

reveal    to    the    manufacturer 

many  ways  in  which  he  can  cooperate  to  ob- 
viate delay.  The  order,  we  shall  assume,  has 
been  completed  and  properly  packed.  The 
shipper  then  proceeds  to  forward  his  goods  by 
rail  to  the  seaboard.  The  railroad  "local  bill 
of  lading"  which  is  issued  to  him  by  the  rail- 
road freight  agent  at  his  station  is  made  out 
to  the  forwarder  to  whom  the  goods  are  to  be 
intrusted.  The  manufacturer  should  see  that 
his  bills  of  lading  are  marked  "for  export" 
and,  if  in  carload  lots  to  New  York,  "for  ex- 
port, lighterage  free."  As  soon  as  these  docu- 
ments are  received,  at  least  one  copy,  officially 
signed  by  the  railroad  representative,  should 
be  sent  at  once  to  the  forwarder  to  assist  him 


EXPORT    HOUSES  91 


in  taking  delivery  of  the  goods.  In  fact, 
"order"  bills  must  be  surrendered  to  the  rail- 
road when  total  delivery  is  made. 

But  the  mailing  of  the  bill  of  lading  is  not 
all.  The  forwarder  must  have  full  instruc- 
tions. Usually  forwarders  provide  shipping 
instruction  letters  on  which  the  manufacturer 
can  fill  in  all  required  data.  This,  together 
with  bills  of  lading,  invoices,  packing-lists, 
and  other  documents  pertaining  to  the  ship- 
ment, should  be  sent  without  delay  to  the  for- 
warder. From  these  he  can  arrange  space  in 
advance,  not  only  so  as  to  obtain  the  most  fav- 
orable rates,  but  also  to  assure  adequate  cargo 
space  when  the  shipment  arrives  at  the 
seaboard  terminal. 

When  the  shipment  reaches  the  seaboard, 
the  railroads  send  out  notices  of  its  arrival  to 
the  consignee,  in  this  case  to  the  forwarder. 
The  shipment  itself,  if  it  is  less  than 
a  carload,  is  sent  to  the  piers  in  New     ^^^^^  Railroad 
York    city,    whence    delivery    to    g^^'"""^  ^"^ 
steamer  is  made  by  trucks.    When 
shipments  are  in  carload  lots  the  freight  is 
held  at  a  lighterage  point,  taken  from  the  cars 
as  a  rule,  and  delivered  by  lighters  or  barges 
to  the  outgoing  steamer  in  accordance  with 
the  instructions  of  the  forwarder.    The  time 
that  a  shipment  can  remain  at  lighterage  point 
or  piers  is  limited.  Under  normal  conditions, 


92 FOREIGN  TRADE 

if  a  carload  and  for  export,  freight  can 
remain  15  days  at  the  lighterage  point; 
if  less  than  a  carload,  ten  days  at  the 
railroad  piers.  After  that  time  carloads 
are  subject  to  track  storage,  demurrage  and 
similar  charges;  and  smaller  shipments  to 
public  warehouse  storage.  From  this  it  is 
evident  why  the  manufacturer  should  be 
prompt  in  sending  forward  the  railroad  docu- 
ments to  the  forwarder. 

The  work  of  the  forwarder  in  looking  after 
the  transfer  of  the  cargo  from  the  railroad 
terminal  to  the  outgoing  steamer  is  very  im- 
portant. On  carload  lots  the  railroads  run- 
ning into  New  York  will  provide  free  light- 
erage alongside  the  vessel  within  certain  limits 
in  the  harbor,  but  they  must  have  definite  in- 
structions, which  the  forwarder  is  in  a  position 
to  give.  In  all  cases  personal  oversight  of 
freight  reaching  a  bustling  seaport  will  insure 
promptness  in  delivery. 

Frequently  as  soon  as  the  forwarder  learns 

that  the  goods  have  been  shipped  by  rail,  he 

commences  to  contract  for  cargo  space.     He 

inquires  from  various  shipping  com- 

Receivtng       ponies  their  rates  on  the  specific  ship- 
at  Dock  ,  ...  ,  . 

ment,  the  quotations  bemg  subject  to 

prompt  acceptance  or  with  options  of  a  few 

days.    When  these  quotations  are  accepted  by 

the  forwarder  the  steamship  company  issues 


EXPORT  HOUSES 93 

a  "shipping  permit,"  which  is  a  statement  to 
the  receiving  clerk  at  the  company's  docks  in- 
structing him  to  receive  the  cargo  within  cer- 
tain specified  dates.  This  must  be  presented 
when  the  goods  are  sent  by  truck  to  the  pier 
and  is  given  to  the  truck  driver.  If  the  ship- 
ment is  to  comprise  several  truck  loads,  the 
shipping  clerk  keeps  the  permit  on  file  and 
checks  ofif  the  loads  against  the  original  per- 
mit. Eventually  the  steamship  company's  of- 
ficial receipt  for  the  entire  shipment  is  given. 
This  receipt  is  important,  as  it  must  be  ex- 
changed later  at  the  steamship  company's 
office  for  the  bill  of  lading  covering  the 
shipment. 

The  United   States  Government  demands 
that   an   "export   declaration"   be   made  out 
previous  to  the  issuance  of  the  official  bill  of 
lading.    This  statement  is  the  source  of 
the  statistics  of  our  export  trade.     It   ^^^^^    . 
calls  for  a  careful  description  of  the 
articles  exported  and  must  be  sworn  to  by  the 
shipper  or  by  some  one  who  has  been  author- 
ized by  him  to  do  so. 

Shipments  to  nearly  all  of  the  Latin-Ameri- 
can countries  must  also  be  accompanied  by  a 
"consular  invoice."  This  is  required  by  the 
customs  authorities  at  the  country  of  destina- 
tion before  the  shipment  is  permitted  to  enter. 
It  deserves  the  closest  attention  as  errors  in 


94 FOREIGN  TRADE 

declarations  often  lead  to  very  serious  fines 

for  the  customer;  errors  seldom  go  unnoticed 

inasmuch  as  a  large  part  of  the  fine,  often  all 

of  it,  goes  to  the  man  who  discovers  the 

onsuar       discrepancy.     The  invoice  usually  is 
invoices 

printed  in  the  language  of  the  coun- 
try of  destination  and  it  must  be  sworn  to  at 
the  consulate  of  that  country  by  the  shipper 
or  his  authorized  representative. 

Various  other  documents  are  necessary  to 

the   proper  despatch   of  the  manufacturer's 

goods.     Among   these    is   the    certificate   of 

origin.    In  many  countries  the  United 

Other  States    enjoys    "most   favored    nation" 

Documents  ...  •      ,  -  rr  i     ■  i 

privileges  in  the  tarifi  regulations,  and 

a  certificate  of  origin  establishing  the  fact  that 
the  goods  come  from  the  United  States  is  re- 
quired before  the  foreign  customer  can  avail 
himself  of  these  advantages.  Another  is  the 
"non-dumping"  certificate,  which  is  required 
by  several  British  colonies,  in  their  endeavor 
to  combat  the  evils  of  indiscriminate  selling 
of  surplus  products.  The  certificate  must 
state  that  the  prices  and  the  discounts  men- 
tioned in  the  invoice  are  the  same  as  rule  in 
the  domestic  market  at  the  date  the  invoice  is 
made  out.  Such  other  special  statements  as 
are  required  by  special  trades  are  also  looked 
after  by  the  forwarder. 
With  the  dock  receipt,  showing  that  the 


EXPORT  HOUSES 95 

goods  have  been  accepted  by  the  steamship 
company's  clerk,  and  the  export  declaration, 
together     with      whatever     extra 
papers  are  required  by  the  country    ^^^If  of  fading 
J-  J      .       .         ,r  J      ..  ana  insurance 

or  destmation,  the  forwarder  is  m  a 

position  to  obtain  his  bills  of  lading  from  the 
steamship  company.  These  are  usually  made 
out  in  the  forwarder's  office  and  taken  to  the 
shipping  office  for  signature.  In  a  subsequent 
Unit  of  the  Course  will  be  included  a  more 
detailed  discussion  of  bills  of  lading,  which 
often  differ  according  to  the  lines  that  issue 
them. 

Finally,  the  forwarder  will  negotiate  the 
marine  or  war  insurance  on  the  manufacturer's 
shipment,  and  will  see  to  it  that,  when  the 
order  is  at  last  on  the  liner  and  has  started  on 
its  ocean  voyage,  everything  has  been  done  to 
protect  the  interests  of  both  the  manufacturer 
and  his  foreign  customer. 

From  the  above  outline  it  is  evident  that  the 
forwarder  must  give  attention  to  a  mass  of  de- 
tails; and,  to  accomplish  the  necessary  work 
without  delay,  he  has  need  of 
the  closest  cooperation  on  the     Cooperation  between 

part     of     the     manufacturer.     Forwarder  and 
^         .  „      .        -  f     Manufacturer 

Especially   in    the   matter   of 

instructions,     the     inland     shipper     should 

exercise   the   most   careful   supervision  over 

his     shipping     department.       Writing     for 


96 FOREIGN  TRADE 

missing  information  may  entail  such  loss  of 
time  that  the  cargo  must  be  held  over  until 
a  following  steamer,  with  the  resultant  dis- 
satisfaction on  the  part  of  the  customer  over- 
seas and  possibly  an  increase  in  the  freight 
rate. 

Cooperation  between  manufacturer  and  for- 
w^arder  is  essential.  Readiness  to  work  to- 
gether in  solving  the  innumerable  problems 
that  arise  should  characterize  the  relations  be- 
tween the  factory  owner  and  his  forwarding 
representative.  The  manufacturer  should  con- 
sider the  forwarder  as  one  of  his  own  office 
stafif,  interested  in  seeing  the  business  grow 
and  always  at  his  disposal  in  answering  per- 
plexing questions  or  suggesting  new  methods 
of  assisting  in  the  distribution  of  his  products. 
The  forwarder  himself  when  requested  will 
issue  his  own  bills  of  lading.  These  apply  to 
the  "combined  shipment"  business  which  he  is 
in  a  position  to  conduct.  Owing 

How  the  Forwarder     ^^     ^^^    f^^^    ^^^^    practically 

Lombtnes  Shtpments       ,,  ,  .        ,. 

all    steamship    Imes    quote    a 

minimum  amount  for  which  a  bill  of  lading 
will  be  issued,  a  profitable  business  has 
sprung  up  in  the  combining  of  several  small 
shipments  which  are  less  than  the  mini- 
mum and  destined  for  the  same  port,  and 
forwarding  them  under  the  same  bill  of  lad- 
ing. To  places  in  Europe,  for  instance,  the  cost 


EXPORT  HOUSES 97 

of  a  minimum  bill  of  lading  is  usually  21 
shillings.  If  three  manufacturers  had  small 
packages  for  the  same  European  port,  it  is 
possible  that  the  cargo  could  be  combined  and 
not  exceed  the  charge  of  21  shillings.  If  they 
were  not  combined,  each  manufacturer  would 
have  to  pay  21  shillings  for  his  separate  lot; 
but  by  making  a  joint  shipment  the  forwarder 
can  proportionately  reduce  the  rate. 

To  cover  this  combined  shipment,  the  for- 
warder makes  out  a  regular  steamship  bill  of 
lading  in  his  own  name.  This  covers  the  whole 
shipment:  but  for  each  individual 

lot  the  forwarder  issues  to  his  clients     J.^^^^r  f^  j. 

r  1    J-  w  Bills  of  Lading 

his  own  bills  or  lading  or  his  own 

receipts.  The  forwarding  concerns  of  the 
world  are  all  more  or  less  in  touch  with  one 
another;  and  the  forwarder  in  New  York 
sends  this  combined  shipment  to  one  of  his 
correspondents  in  the  foreign  port,  consigning 
it  direct  to  this  agent,  together  with  a  way  bill 
showing  how  and  when  the  merchandise  was 
sent  and  containing  complete  information  as 
its  delivery. 

The  representative  at  the  foreign  port  clears 
the  goods  through  the  custom  house  and  pays 
all  the  other  incidental  charges.  It  is  obvi- 
ously impossible  for  the  forwarder  in  this 
country  to  know  all  these  expenses,  and  con- 
sequently, in  contrast  to  our  domestic  express 


98 FOREIGN  TRADE 

charges  where  the  rate  includes  delivery  at  the 
door,  the  charge  made  by  the  forwarder  covers 
only  transportation,  and  not  such  other  costs 
as  dock  and  town  dues,  import  and  other 
duties,  stamp  taxes,  internal  revenue  charges, 
delivery  costs,  etc.  Bills  of  lading  issued  by 
forwarders  and  by  express  companies  doing  a 
forwarding  business  clearly  state  these  condi- 
tions. With  thousands  of  articles  for  the 
various  countries  of  the  world  and  with  con- 
stant changes  in  freight,  duty  and  the  like,  it 
would  be  impossible  for  a  forwarder  to  pro- 
vide a  tariff  covering  all  costs,  so  that  a  pack- 
age on  which  the  expressage  had  been  paid 
might  be  delivered  without  further  charges. 

Banks  and  bankers  generally  object  to  for- 
warders' bills  of  lading  on  the  ground  that 
jurisdiction  of  the  merchandise  lies  with  the 
forwarders  rather  than  with  the  holders  of  the 
forwarders'  bills  of  lading,  and  that  control  of 
the  freight  is  not  transferred  to  the  banks  un- 
conditionally enough  by  the  surrender  of 
forwarders'  documents. 

The  reputation  of  a  forwarding  house 
should  be  its  greatest  business  asset,  and  the 
bills  of  lading  that  it  issues  over  the  firm's 
signature  depend  for  their  validity  on  the 
strength  of  the  house's  business  standing.  The 
same  rule  applies  to  forwarders  as  to  steam- 
ship lines. 


II 


Foreign    and    Special    Services    by    the 
Forwarder 


A  GOOD  forwarding  house  has,  or  should 
have,  efficient  connections  abroad.    The 

better  agents  the  forwarder  has  abroad, 
the  better  service  he  can  offer  his  client  here. 
Some  suggestion  of  the  assistance  the  agent 
abroad  renders  was  given  in  the  preceding 
chapter,  in  the  matter  of  entering  goods  at  the 
custom  house  and  paying  town  and  dock  dues. 
He  also  chooses  the  best  route  available  for 
getting  the  goods  to  the  foreign  customer 
located  inland.  Reciprocally  the  foreign  agent 
will  attend  to  return  freight,  and  will  thus  be 
at  the  disposal,  not  only  of  the  American 
exporter,  but  of  the  importer  as  well. 

Without  going  into  the  details  of  export 
financing,  which  will  be  discussed  in  a  later 
Unit  of  the  Course,  it  is  possible  to  show  how 
the   forwarder   can   assist  the   ex- 
porter in  attending  to  payment  for    How  a  Foreign 
the  goods  at  the  time  of  their  deliv-    ^^ent  Assists 

u       J      TT   J  1  u     f  •  tn  Ftnanctng 

ery  abroad.     Under  usual  bankmg 

conditions,  when  the  manufacturer  has  ar- 
ranged to  get  his  remittances  through  drafts, 
drawn  upon  his  customer,  the  draft  with  ocean 

99 


loo FOREIGN  TRADE 

bills  of  lading  attached  is  presented  by  the 
American  bank's  foreign  connection  to  the 
consignee.  The  consignee  must  pay  the  draft 
before  he  can  take  up  the  documents  and  ac- 
quire immediate  ownership  of  the  goods.  If 
the  customer  is  in  some  inland  town,  he  must 
send  these  papers  to  an  agent  for  clearance  at 
the  custom  house  and  for  forwarding  to  the 
inland  point.  In  case  he  refuses  to  take  up 
the  documents,  the  foreign  bank's  only  interest 
is  to  notify  the  American  bank  that  payment 
has  not  been  made  and  to  ask  for  instructions. 
Let  us  consider  what  the  procedure  is  in  the 
event  of  the  goods  being  consigned  to  the 
forwarder's  agent  and  not  to  the  customer 
direct.  We  shall  find  that  there  is  usually  a 
saving  in  time  and  incidental  charges  for  both 
customer  and  client.  Immediately  on  arrival 
of  the  steamer  the  foreign  agent  enters  and 
clears  the  consignment,  thus  avoiding  delays 
and  extra  charges  at  the  custom  house.  He 
then  holds  the  freight  at  the  disposal  of  the 
customer,  subject  to  the  presentation  of  the  for- 
warder's bills  of  lading,  properly  endorsed, 
which  the  consignee  has  obtained  through  his 
bank.  In  the  event  that  the  draft  is  delayed 
in  reaching  its  destination  or  if,  for  any  reason, 
the  draft  and  documents  are  not  promptly  ac- 
cepted by  the  customer,  the  forwarder's  agent 
takes  charge  of  the  property  and  protects  the 


EXPORT  HOUSES loi 

interest  of  the  manufacturer,  frequently  stor- 
ing the  goods  in  his  own  warehouses  until  all 
difficulties  have  been  settled. 

The  foreign  forwarder,  in  fact,  includes  in 
his  legitimate  functions  many  services  which 
his  American  cousin  as  yet  performs  only  in- 
cidentally.    In  addition  to  at- 

tending  to  all  the  matters  con-    i^'"'''  ".  Forwarder 

,      .  ,     ,  .  ,     Engage  in  Other 

nected  with  the  transportmg  of    j^ctivities? 

the  goods,  he  frequently  adds  to 
this  work  the  purchase  and  sale  of  goods, 
the  cashing  of  drafts,  the  selling  of  railroad 
and  steamship  tickets,  the  owning  and  operat- 
ing of  warehouse  plants,  and,  in  some  cases, 
the  representation,  as  agent,  of  steamship 
lines. 

It  has  frequently  been  asked  whether  the 
American  forwarder  should  engage  in  similar 
activities,  especially  in  the  purchase  and  sale 
of  goods,  the  discounting  of  drafts,  the  main- 
tenance of  foreign  banking  connections,  and 
the  negotiating  of  marine  and  other  insur- 
ance. It  is  evident  that  the  larger  the 
volume  of  goods  the  forwarder's  client 
sells  or  purchases,  the  greater  is  the  volume 
of  the  forwarding  business.  However,  it  is 
generally  the  case  that  the  forwarder  who 
branches  out  into  different  lines  is  very  likely 
to  neglect  his  principal  business.  Again,  if 
he  adds  insurance  or  purchasing  to  his  busi- 


I02  FOREIGN  TRADE 

ness  he  will  find  a  disposition  among  firms 
engaged  in  these  occupations  to  treat  him  as 
a  competitor  and  to  criticise  him  for  not 
keeping  within  the  bounds  of  his  own  class 
of  trade. 

The  same  remarks  may  be  applied  to  trans- 
portation  and   shipping  companies   that,  in 
seeking  to  attract  traffic  to  their  lines,  offer 
their  services  as  forwarders.     By 
Steamship  Lines     ^^^-       ^  ^^^^  pittance  o.r  no  re- 
as  forwarders  .  , ,    /•         ,  i 

muneration   at  all  for   the  work 

performed  they  have  become  severe  competi- 
tors of  the  forwarders,  who  have  built  up 
their  organizations  through  years  of  labor 
and  experience. 

It  is  generally  a  fair  conclusion  that  one 
must  pay  for  value  received.  If  a  steamship 
company  employs  competent  men  as  forward- 
ers to  handle  its  shipments  and  makes  no 
charge  for  the  extra  service,  freight  rates  must 
be  increased  to  cover  the  cost  of  this  traffic  de- 
partment, or  the  revenue  must  be  obtained  ir^ 
some  other  way  either  from  the  shipper  or  the 
consignee.  Therefore,  it  would  seem  best  that 
the  forwarder  control  his  legitimate  field,  and 
that  he  in  turn  employ  the  services  of  outside 
bankers,  insurance  concerns,  storage  houses 
and  the  like.  Reciprocation  between  banks, 
shipping  lines  and  forwarders  means  an  active 
and  healthy  business  cooperation,  and  the  ac- 


EXPORT  HOUSES 103 

tive  competition  ruling  in  the  separate  profes- 
sions themselves  will  assure  the  manufacturer 
that  he  will  not  be  charged  exorbitant  rates  be- 
cause of  the  absence  of  this  extraneous  rivalry. 
In  the  nature  of  the  forwarder's  activities 
there  are  many  special  services  that  he  can 
render  to  the  manufacturer.  He  can  often  be 
of    direct   assistance    in   building 

up  the  manufacturer's  export  busi-    f^'J'^^  ^"^"i'''' 
^  .         . .  .  ,  by  forwarders 

ness.     Primarily,  of  course,  hon- 
esty and  progressiveness  in  performing  the 
tasks  for  which  the  manufacturer  employs  him 
are  the  most  valuable  contributions  he  can 
make  to  the  success  of  the  exporter's  campaign. 

Among  the  special  services  is  the  providing 
of  information  of  all  sorts  to  the  factory  owner 
unacquainted  with  the  ways  of  the  export  busi- 
ness. The  forwarder  can  advise  regarding 
routes  and  distances ;  he  can  indicate  how  cer- 
tain places  can  best  be  reached,  what  regula- 
tions and  restrictions  exist,  what  sort  of  han- 
dling the  goods  must  stand  before  reaching  the 
customer.  He  can  supply  sailing  dates  of 
steamers,  give  notice  of  their  arrival  here  or 
abroad,  investigate  delays,  advise  as  to  changes 
in  rates — in  short,  supply  all  the  information 
that  the  shipper  himself  would  be  able  to  ob- 
tain if  he  were  at  seaboard  and  in  touch  with 
traffic  conditions. 

To  the  shipper  who  has  chosen  to  forward 


I04  FOREIGN  TRADE 

his  goods  on  a  railroad  "through  bill  of  lad- 
ing" the  forwarder  can  still  be  of  assistance. 
Railroads    accepting    freight   in    the 
Assistance        Central    Western    States    will    issue, 
on  Through      ^^der    certain    conditions,     through 
Shipments         ....        ,  ,    ,.         r  u-      • 

bills  of  lading  from  shipping  point 

to  destination.  This  means  that  a  manufac- 
turer sending  a  carload  of  machinery  to 
Buenos  Aires,  and  wishing  to  obtain  his  money 
against  a  letter  of  credit  which  his  South 
American  customer  has  opened  in  an  Ameri- 
can bank  (so  that  the  manufacturer  may 
receive  remittance  upon  shipment,  with- 
out waiting  a  considerable  time  for  the 
freight  to  leave  the  seaboard)  can  obtain  his 
through  bills  from  the  railroad  and  present 
the  bills  at  the  bank  at  once  as  negotiable 
documents.  Freight  on  through  bills  of 
lading,  however,  is  not  always  promptly 
moved  at  seaboard,  due  to  various  reasons,  and 
the  merchant,  when  asked  by  his  customer  for 
information  as  to  the  shipment,  can  give  no 
particulars  without  ascertaining  first  through 
his  railroad  agent  where  and  how  the  delay 
has  occurred.  Steamship  lines  may  be  in  a 
position  to  prefer  a  certain  class  of  cargo  and 
to  put  aside  for  the  moment  freight  arriving 
on  through  documents.  It  is  here  that  the  for- 
warder, having  his  client's  interests  before 
him,  can  trace  the  cargo  from  the  moment  of 


EXPORT  HOUSES  105 

its  arrival  by  rail  until  it  reaches  the  foreign 
customer,  assuring  the  manufacturer  that  his 
goods  are  not  neglected. 

It  frequently  happens  that  a  steamship  line 
will  require  prepayment  of  freight,  and  the 
manufacturer  may  not  be  in  a  position  to  at- 
tend to  these  details.    In  such  cases 
the  forwarder  will  advance  the  cost    ^'^'^^^'''"^ 
of  the  freight,  and  will  send  the  bill 
along  to  his  foreign  agent  for  collection  from 
the  consignee.     Likewise   some    forwarding 
concerns  will  undertake  to  send  forward  ship- 
ments on  C.O.D.   (cash  on  delivery)   terms, 
making  collections  through  their  foreign  rep- 
resentative from  the  foreign  customer  of  the 
cost  and  all  accrued  charges.    The  forwarder 
also  can  make  collections  which  are  too  small 
to  pass  through  a  bank. 

In  the  delivery  of  samples  free  of  all  charges 
to  the  foreign  customer  the  forwarder  can  per- 
form a  specific  service.  A  manufacturer  often 
wishes  to  deliver  catalogs  to  a  customer  in  a 
country  where  a  duty  is  levied  on  such  matter. 
In  these  cases  the  forwarder's  agent  clears  the 
shipment  through  the  custom  house,  pays  all 
charges,  and  sends  his  bill  to  the  American 
forwarder  who  collects  it  from  the  manufac- 
turer. 

The  foreign  agent  is  also  able  to  provide  the 
forwarder  with  such  credit  information  as  the 


io6  FOREIGN  TRADE 

manufacturer  may  desire.  Being  in  the  cus- 
tomer's own  town  and  acquainted  with  local 
bankers  and  merchants,  the  forwarder's  rep- 
resentative is  often  the  best  means  of  obtaining 
accurate  information  regarding  a  prospective 
customer's  financial  standing. 

For  his  services  the  forwarder  expects  a  fair 

proportion   of   profit.     His    organization    is 

world-wide,  it  is  built  on  progressive  lines, 

and  the  very  character  of  the 

Forwarder  Essential     ^^^^-^^   ^^   performs,  with   its 

to  I  rade  Expansion      .-.,:,  .  - 

mnnite  details,  requires  a  large 

clerical  staff.  Knowledge  of  the  world  routes, 
the  world  markets  and  the  multitude  of  other 
facts  which  the  forwarder  must  always  have 
at  his  command  is  obtained  only  by  years  of 
actual  experience,  by  constant  hard  labor  and 
much  expense.  In  recent  years  the  competi- 
tion on  the  part  of  the  railroads  and  shipping 
lines,  each  anxious  to  divert  traffic  to  its  chan- 
nels, has  tended  to  pare  down  the  forwarder's 
profits  to  a  very  small  margin. 

Nearly  all  of  the  large  trunk  lines  running 
into  New  York  have  certain  custom  house 
and  shipping  concerns  acting  as  their  import 
.  agents.  Although  the  export  business  of  the 
lines  is  now  handled  by  the  railroads  them- 
selves, it  is  becoming  more  and  more  burden- 
some, and  with  the  growth  of  our  export  trade, 
it  is  to  be  expected  that  this  function  of  the 


EXPORT  HOUSES 107 

railroads  will  also  demand  a  special  organiza- 
tion, and  that  much  of  the  work  will  be  dele- 
gated to  the  forwarding  houses.  Many  roads 
already  entrust  the  forwarding  of  small  pack- 
ages to  their  respective  express  companies, 
which  carry  on  an  extensive  foreign  forward- 
ing trade,  in  addition  to  their  domestic  express 
business.  The  future  of  the  forwarding  busi- 
ness is  inseparably  bound  up  with  the  future 
of  the  nation's  foreign  trade,  and  the  com- 
mercial expansion  which  the  United  States  is 
now  experiencing  and  which  seems  certain  to 
continue  will  make  the  forwarder  more  and 
more  essential  to  the  nation's  prosperity. 


io8 FOREIGN  TRADE 

SUGGESTIONS    AS   TO   FURTHER 
READING 

There  are  practically  no  other  books  in 
English  devoted  solely  to  the  subject  of  the 
activities  of  the  export  merchant,  the  export 
commission  house,  the  manufacturer's  agent  or 
the  export  forwarder.  The  subject  is  treated 
at  some  length  by  B.  Olney  Hough  in  his  two 
books  on  foreign  trade,  Ocean  Traffic  and 
Trade  and  Practical  Exporting.  An  interest- 
ing article  by  W.  C.  Downs,  entitled  "The 
Commission  House  in  Latin-American 
Trade,"  was  published  in  The  Quarterly 
Journal  of  Economics  in  the  issue  for  Novem- 
ber, 191 1.  Pages  93  to  120  of  the  official  report 
of  the  Third  National  Foreign  Trade  Conven- 
tion, which  was  held  at  New  Orleans,  contain 
a  discussion  of  the  subject,  "How  to  Utilize 
the  Export  Merchant  and  the  Export  Com- 
mission House." 

Shortly  after  the  outbreak  of  the  European 
War  there  appeared  in  Germany  the  first 
volume  of  a  two-volume  work  by  Dr.  Walter 
Schmidt-Rimpler  on  the  Geschichte  des 
l^ommissionsgeschafts  in  Deutschland  which 
treated  comprehensively  the  commission 
house  in  both  domestic  and  foreign  trade  in 
Germany.  The  second  volume  of  this  work 
has  not  yet  been  published. 


EXPORT  HOUSES logi 

QUIZ  QUESTIONS 

The  Export  Merchant 

I 

1.  What  principle  underlies  the  business  of  the  export 
merchant  ? 

2.  How  does  the  business  of  the  export  commission 
merchant  differ  from  that  of  the  export  merchant? 

3.  To  what  extent  do  these  types  usurp  each  other's 
functions  ? 

4.  Mention  the  advantages  of  dividing  a  merchant's 
home-office  force  into  geographical  departments. 

5.  What  is  meant  when  it  Is  said  that  a  large  part 
of  the  merchant's  business  is  on  modern  C.I.F.  terms? 
What  are  the  advantages  of  these  terms  ? 

6.  Name  the  various  bases  on  which  export  merchants 
make  payment  to  manufacturers. 

7.  State  briefly  the  seven  methods  by  which  the  foreign 
customer  makes  payment  to  the  export  merchant. 

II 

8.  Why  does  the  export  merchant  have  branches  in 
the  United  States? 

9.  Mention  six  lines  of  activity  in  which  the  foreign 
branch  houses     '^age. 

10.  How  does  c  "foreign  agent"  differ  from  a  "foreign 
branch  house"? 

11.  How  thoroughly  has  the  export  merchant 
exploited  the  markets  of  South  America? 

12.  What  have  been  some  of  the  causes  of  dissatisfac- 
tion between  manufacturers  and  export  merchants  ? 

13.  What  is  the  most  general  basis  on  which  merchants 
undertake  to  represent  manufacturers  abroad  ? 

14.  Mention  four  advantages  of  handling  foreign 
trade  through  the  export  merchant  and  his  foreign  repre- 
sentatives. 


no FOREIGN  TRADE 

The  Export  Commission  House 
I 

1.  What  is  the  primary  function  of  the  export  com- 
mission house? 

2.  What  is  meant  by  "buying  on  an  F.O.B.  basis"? 
What  is  an  "indent"  and  what  does  it  contain  other  than 
the  list  of  goods  to  be  purchased  ? 

3.  What  is  the  advantage  to  the  foreign  importer  of 
placing  an  indent  containing  a  great  many  items  through 
a  commission  house  ? 

4.  Does  the  commission  house  charge  commission  for 
the  credit  that  it  extends  to  the  foreign  importer?  Who 
pays  the  interest  involved  and  how? 

5.  What  is  meant  by  "buying  on  a  C.I.F.  basis"? 
What  is  the  main  advantage  of  this  method  of  buying? 

6.  Why  is  it  not  easy  to  quote  C.I.F.  terms  on 
specialties  ? 

7.  What  is  the  main  advantage  to  a  manufacturer  of 
dealing  through  an  export  commission  house? 

8.  What  is  the  distinction  between  an  export  mer- 
chant, an  export  commission  house  and  a  manufacturer's 
export  agent? 

II 

9.  Name  the  six  individuals  that  compose  a  unit 
section  of  an  export  commission  house's  home  organization. 

10.  Why  does  a  commission  house  usually  specialize 
in  certain  products? 

11.  What  conditions  force  a  commission  house  to  spe- 
cialize in  certain  markets  and  countries?  Give  an  example 
from  Australia  and  Argentina. 

12.  Name  the  three  methods  employed  by  commiission 
houses  in  getting  sales.  Which  has  proved  the  most 
successful  ? 

13.  Give  an  example  of  how  a  commission  house  "sells 
service." 

14.  What  are  the  usual  rates  of  commission?  Com- 
pare the  relative  amounts  of  work  performed  by  a  com- 


EXPORT  HOUSES iii 

mission  house  in  filling  a  small  and  a  large  order.     On 
which  is  the  rate  of  commission  usually  smaller? 

15.  Why  must  the  importer  abroad  buy  staples  on  a 
C.I.F.  basis  in  order  to  protect  himself  against  competition  ? 

16.  Outline  how  the  commission  house  buyer  proceeds 
to  purchase  the  order  of  a  foreign  customer. 

17.  What  terms  do  the  manufacturers  grant  the  com- 
mission houses?  What  terms  does  the  commission  house 
grant  the  customer  overseas  ? 

18.  Explain  why  the  method  employed  by  commission 
houses  in  financing  Australian  trade  is  impracticable  in  the 
trade  with  Argentina. 

Ill 

19.  What  is  the  first  question  asked  by  the  commission 
house  when  an  order  is  received? 

20.  How  have  importers  abroad  frequently  abused  the 
credit  privileges  extended  to  them  ? 

21.  Under  what  circumstances  must  the  commission 
house  buyer  use  his  own  judgment? 

22.  Outline  the  various  steps  in  the  work  of  the  ship- 
ping clerk. 

23.  By  which  department  are  the  manufacturer's  in- 
voices checked  and  paid? 

24.  What  are  the  duties  of  the  invoicing  department? 

25.  What  is  "C.I.F.  &E."? 

IV 

26.  Define  the  three  types  of  manufacturer's  agents. 

27.  Under  what  conditions  is  it  proper  for  a  commis- 
sion house  to  accept  remuneration  from  the  manufacturer 
and  charge  commission  to  the  buyer  on  the  same  order? 

28.  Explain  what  is  meant  by  "manufacturer's  agent" 
in  the  ordinary  usage  of  the  word  in  New  York  City. 

29.  Why  is  the  term  "commission  house"  often  mis- 
applied to  certain  export  concerns? 

30.  How  does  "small  trade"  assure  the  continuance  of 
the  export  commission  house  ? 


112  FOREIGN  TRADE 


The  Export  Forwarder 
I 

1.  How  should  the  manufacturer's  local  railroad  bills 
of  lading  be  marked,  and  why  should  they  be  sent  without 
delay  to  the  forwarder? 

2.  To  what  extent  will  the  railroads  running  into 
New  York  City  grant  free  lighterage  on  export  shipments? 

3.  What  is  a  "shipping  permit,"  a  "dock  receipt," 
an  "export  declaration,"  a  "consular  invoice,"  a  "certificate 
of  origin"? 

4.  How  does  the  forwarder  make  a  profit  by  "com- 
bining shipments"  ? 

5.  What  is  a  "forwarder's  bill  of  lading"  ?  On  what 
does  it  depend  for  its  validity? 

6.  Do  the  forwarder's  quoted  charges  cover  all 
expenses  from  factory  to  consignee? 

II 

7.  Explain  how  the  forw^arder's  foreign  representa- 
tive can  be  of  assistance  in  connection  with  the  financing  of 
orders. 

8.  What  two  objections  might  be  raised  against  a  for- 
warder's engaging  in  other  activities? 

9.  How  can  a  forwarder  be  of  assistance  on  through 
shipments  ? 

10.  Explain  how  the  forwarder  handles  C.O.D.  ship- 
ments and  consignments  of  samples. 

11.  Outline  the  present  situation  between  the  for- 
warders and  the  shipping  and  railroad  lines  as  regards  the 
forwarding  business. 

12.  Is  the  forwarder  increasing  or  decreasing  in 
importance  as  a  factor  in  our  export  trade? 

(P.  1700-Rev.) 


'«'  t  ■ 


UNIVERSITY  OF  CALIFORNIA  LIBRARY 

Los  Angeles 
This  book  is  DUE  on  the  last  date  stamped  below. 


m  9    1985 


COURSE  IN  FOREIGN  TRADE 
Unit  IV 


This  envelope  contains  the  following  material: 

I  -A  letter  from  the  Director  of  the  Course. 

II  -A  Reading  Report  and  Question  Card. 
IIl-A  Problem  and  an  envelope  addressed  to 
the  Secretary  of  tjie  Course,  in  which  the 
solution  to  the  problem  should  be  mailed. 


First:  Read  the  letter  from  the  Director  of  the  Course 

Second:  Read  the  text  book  through  once.  Try  to  ccrrplete 
this  reading  at  one  time,  reading  continucusly  from  beginning 
to  end. 

Third:  Fill  in  the  Reading  Report  Card,  showing  the  date 
when  the  Unit  was  received  and  the  date  upon  which  the  first 
reading  was  completed.  If  you  have  any  questions  on  the  subject 
matter  of  the  text  bock,  you  may  note  them  on  the  card  and  they 
will  be  answered  either  on  your  next  problem  solution  or  by 
special  letter,  if  necessary. 

Fourth:  Study  the  text  book  carefully,  chapter  by  chapter, 
testing  your  knowledge  by  means  of  the  Quiz  Questions  which 
you  will  find  in  the  back  of  the  text  book.  The  Quiz  Questions 
are  arranged  in  sections  which  correspond  to  the  chapters  of  the 
text  book.  It  is  not  necessary  to  write  out  the  answers  to  the 
Quiz  Questions. 

Fifth?  Write  your  solution  to  the  problem,  using  the  solution 
sheets  with  which  you  have  been  supplied.  Study  the  problem 
carefully  before  you  begin  to  write  and  be  sure  that  you  under- 
stand exactly  what  is  required. 

Sixth:  Mail  the  solution  to  the  Secretary  of  the  Couree  in 
the  envelope  provided. 

The  materia!  in  Ihis  envelope  was  formerly  cairied  in  pockets  in  the 
front  arsd7back  covers  of  the  text  books.  It  is  hoped  that  the  new 
arrangement  will  avoid  the  inconvenience  ^','hich  was  soiiii_limcs 
caused  by  the  loss  of  material  whi»h  dropped  from  the  pockets 
when  the  books  were  unpacked. 

Business  Training  Corporation     -    New  York  City 


